Should You Use S.A.I. Leisure Group's (HKG:1832) Statutory Earnings To Analyse It?

By
Simply Wall St
Published
December 04, 2020

As a general rule, we think profitable companies are less risky than companies that lose money. That said, the current statutory profit is not always a good guide to a company's underlying profitability. In this article, we'll look at how useful this year's statutory profit is, when analysing S.A.I. Leisure Group (HKG:1832).

We like the fact that S.A.I. Leisure Group made a profit of US$5.10m on its revenue of US$78.1m, in the last year. Below, you can see that both its revenue and its profit have fallen over the last three years.

See our latest analysis for S.A.I. Leisure Group

SEHK:1832 Earnings and Revenue History December 4th 2020

Importantly, statutory profits are not always the best tool for understanding a company's true earnings power, so it's well worth examining profits in a little more detail. This article will discuss how unusual items have impacted S.A.I. Leisure Group's most recent profit results. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of S.A.I. Leisure Group.

How Do Unusual Items Influence Profit?

Importantly, our data indicates that S.A.I. Leisure Group's profit was reduced by US$729k, 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. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. If S.A.I. Leisure Group doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Our Take On S.A.I. Leisure Group's Profit Performance

Because unusual items detracted from S.A.I. Leisure Group's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think S.A.I. Leisure Group's earnings potential is at least as good as it seems, and maybe even better! Unfortunately, though, its earnings per share actually fell back over the 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. If you'd like to know more about S.A.I. Leisure Group as a business, it's important to be aware of any risks it's facing. When we did our research, we found 4 warning signs for S.A.I. Leisure Group (1 is potentially serious!) that we believe deserve your full attention.

This note has only looked at a single factor that sheds light on the nature of S.A.I. Leisure Group's 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.

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This article by Simply Wall St is general in nature. 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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