Tse Sui Luen Jewellery (International)'s (HKG:417) Solid Earnings May Rest On Weak Foundations

The recent earnings posted by Tse Sui Luen Jewellery (International) Limited (HKG:417) were solid, but the stock didn't move as much as we expected. We believe that shareholders have noticed some concerning factors beyond the statutory profit numbers.

Check out our latest analysis for Tse Sui Luen Jewellery (International)

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Tse Sui Luen Jewellery (International)'s profit received a boost of HK$16m in unusual items, over the last year. 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. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Tse Sui Luen Jewellery (International).

Our Take On Tse Sui Luen Jewellery (International)'s Profit Performance

Arguably, Tse Sui Luen Jewellery (International)'s statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Tse Sui Luen Jewellery (International)'s true underlying earnings power is actually less than its statutory profit. The silver lining is that its EPS growth over the last year has been really wonderful, even if it's not a perfect measure. 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. When we did our research, we found 3 warning signs for Tse Sui Luen Jewellery (International) (1 can't be ignored!) that we believe deserve your full attention.

This note has only looked at a single factor that sheds light on the nature of Tse Sui Luen Jewellery (International)'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 that insiders are buying.

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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.