We Think That There Are Some Issues For Hing Lee (HK) Holdings (HKG:396) Beyond Its Promising Earnings

The recent earnings posted by Hing Lee (HK) Holdings Limited (HKG:396) were solid, but the stock didn't move as much as we expected. We think this is due to investors looking beyond the statutory profits and being concerned with what they see.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

The Impact Of Unusual Items On Profit

To properly understand Hing Lee (HK) Holdings' profit results, we need to consider the HK$14m gain attributed to unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. Which is hardly surprising, given the name. Hing Lee (HK) Holdings had a rather significant contribution from unusual items relative to its profit to June 2025. 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 Hing Lee (HK) Holdings.

Our Take On Hing Lee (HK) Holdings' Profit Performance

As we discussed above, we think the significant positive unusual item makes Hing Lee (HK) Holdings' earnings a poor guide to its underlying profitability. For this reason, we think that Hing Lee (HK) Holdings' statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. On the bright side, the company showed enough improvement to book a profit this year, after losing money last year. 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. You'd be interested to know, that we found 4 warning signs for Hing Lee (HK) Holdings and you'll want to know about them.

Today we've zoomed in on a single data point to better understand the nature of Hing Lee (HK) 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.