There May Be Some Bright Spots In Capital Environment Holdings' (HKG:3989) Earnings

Shareholders appeared unconcerned with Capital Environment Holdings Limited's (HKG:3989) lackluster earnings report last week. Our analysis suggests that while the profits are soft, the foundations of the business are strong.

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The Impact Of Unusual Items On Profit

Importantly, our data indicates that Capital Environment Holdings' profit was reduced by CN¥111m, due to unusual items, over the last year. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Capital Environment Holdings to produce a higher profit next year, all else being equal.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Capital Environment Holdings.

Our Take On Capital Environment Holdings' Profit Performance

Unusual items (expenses) detracted from Capital Environment Holdings' earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Capital Environment Holdings' statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in 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. If you'd like to know more about Capital Environment Holdings as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 3 warning signs for Capital Environment Holdings (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 Capital Environment Holdings' profit. But there are plenty of other ways to inform your opinion of a company. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. 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.