We Think That There Are Issues Underlying C.banner International Holdings' (HKG:1028) Earnings

Despite posting some strong earnings, the market for C.banner International Holdings Limited's (HKG:1028) stock hasn't moved much. Our analysis suggests that shareholders have noticed something concerning in the numbers.

Check out our latest analysis for C.banner International Holdings

The Impact Of Unusual Items On Profit

To properly understand C.banner International Holdings' profit results, we need to consider the CN¥44m gain attributed to unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. C.banner International Holdings had a rather significant contribution from unusual items relative to its profit to June 2021. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

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

Our Take On C.banner International Holdings' Profit Performance

As we discussed above, we think the significant positive unusual item makes C.banner International Holdings' earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that C.banner International Holdings' underlying earnings power is lower than its statutory profit. On the bright side, the company showed enough improvement to book a profit this year, after losing money 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'd like to know more about C.banner International Holdings as a business, it's important to be aware of any risks it's facing. To that end, you should learn about the 3 warning signs we've spotted with C.banner International Holdings (including 1 which doesn't sit too well with us).

Today we've zoomed in on a single data point to better understand the nature of C.banner International Holdings' profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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 that insiders are buying.

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.

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