Orient Victory Smart urban Services Holding's (HKG:265) Solid Profits Have Weak Fundamentals

Last week's profit announcement from Orient Victory Smart urban Services Holding Limited (HKG:265) was underwhelming for investors, despite headline numbers being robust. We think that the market might be paying attention to some underlying factors that they find to be concerning.

View our latest analysis for Orient Victory Smart urban Services Holding

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Orient Victory Smart urban Services Holding's profit received a boost of HK$6.3m in unusual items, over the last year. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. 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. If Orient Victory Smart urban Services Holding doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Orient Victory Smart urban Services Holding.

Our Take On Orient Victory Smart urban Services Holding's Profit Performance

We'd posit that Orient Victory Smart urban Services Holding's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that Orient Victory Smart urban Services Holding's statutory profits are better than its underlying earnings power. 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. 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 2 warning signs for Orient Victory Smart urban Services Holding and you'll want to know about them.

This note has only looked at a single factor that sheds light on the nature of Orient Victory Smart urban Services Holding's profit. But there are plenty of other ways to inform your opinion of a company. 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.