We Like TIL Enviro's (HKG:1790) Earnings For More Than Just Statutory Profit

TIL Enviro Limited (HKG:1790) announced a healthy earnings result recently, and the market rewarded it with a strong uplift in the stock price. This reaction by the market reaction is understandable when looking at headline profits and we have found some further encouraging factors.

Check out our latest analysis for TIL Enviro

How Do Unusual Items Influence Profit?

To properly understand TIL Enviro's profit results, we need to consider the HK$61m expense attributed to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. If TIL Enviro doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of TIL Enviro.

Our Take On TIL Enviro's Profit Performance

Because unusual items detracted from TIL Enviro's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that TIL Enviro's statutory profit actually understates its earnings potential! And the EPS is up 18% over the last twelve months. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Every company has risks, and we've spotted 4 warning signs for TIL Enviro (of which 2 shouldn't be ignored!) you should know about.

This note has only looked at a single factor that sheds light on the nature of TIL Enviro's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.