Galaxy Entertainment Group's (HKG:27) Solid Earnings Are Supported By Other Strong Factors

Even though Galaxy Entertainment Group Limited's (HKG:27) recent earnings release was robust, the market didn't seem to notice. Investors are probably missing some underlying factors which are encouraging for the future of the company.

See our latest analysis for Galaxy Entertainment Group

How Do Unusual Items Influence Profit?

For anyone who wants to understand Galaxy Entertainment Group's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by HK$543m due to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. In the twelve months to June 2023, Galaxy Entertainment Group had a big unusual items expense. All else being equal, this would likely have the effect of making the statutory profit look worse than its underlying earnings power.

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On Galaxy Entertainment Group's Profit Performance

As we discussed above, we think the significant unusual expense will make Galaxy Entertainment Group's statutory profit lower than it would otherwise have been. Based on this observation, we consider it possible that Galaxy Entertainment Group's statutory profit actually understates its earnings potential! And one can definitely find a positive in the fact that it made a profit this year, despite 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. 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. For example - Galaxy Entertainment Group has 2 warning signs we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Galaxy Entertainment 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. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying to be useful.

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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.