Huitongda Network's (HKG:9878) Profits May Not Reveal Underlying Issues

Huitongda Network Co., Ltd.'s (HKG:9878) robust recent earnings didn't do much to move the stock. However the statutory profit number doesn't tell the whole story, and we have found some factors which might be of concern to shareholders.

Check out our latest analysis for Huitongda Network

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Huitongda Network's profit received a boost of CN¥148m in unusual items, over the last year. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. If Huitongda Network doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On Huitongda Network's Profit Performance

Arguably, Huitongda Network's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Huitongda Network's statutory profits are better than its underlying earnings power. The good news is that, its earnings per share increased by 27% in the last year. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. If you want to do dive deeper into Huitongda Network, you'd also look into what risks it is currently facing. While conducting our analysis, we found that Huitongda Network has 1 warning sign and it would be unwise to ignore this.

This note has only looked at a single factor that sheds light on the nature of Huitongda Network's profit. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying to be useful.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.