Investors Shouldn't Be Too Comfortable With Miramar Hotel and Investment Company's (HKG:71) Earnings

Despite posting some strong earnings, the market for Miramar Hotel and Investment Company, Limited's (HKG:71) stock hasn't moved much. Our analysis suggests that this might be because shareholders have noticed some concerning underlying factors.

View our latest analysis for Miramar Hotel and Investment Company

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Miramar Hotel and Investment Company's profit received a boost of HK$160m 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 analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. Which is hardly surprising, given the name. If Miramar Hotel and Investment Company 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 Miramar Hotel and Investment Company.

Our Take On Miramar Hotel and Investment Company's Profit Performance

Arguably, Miramar Hotel and Investment Company's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Miramar Hotel and Investment Company's true underlying earnings power is actually less than its statutory profit. But the good news is that its EPS growth over the last three years has been very impressive. 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. Every company has risks, and we've spotted 1 warning sign for Miramar Hotel and Investment Company you should know about.

Today we've zoomed in on a single data point to better understand the nature of Miramar Hotel and Investment Company'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.