Does Dalipal Holdings's (HKG:1921) Statutory Profit Adequately Reflect Its Underlying Profit?

Broadly speaking, profitable businesses are less risky than unprofitable ones. That said, the current statutory profit is not always a good guide to a company's underlying profitability. This article will consider whether Dalipal Holdings' (HKG:1921) statutory profits are a good guide to its underlying earnings.

While Dalipal Holdings was able to generate revenue of CN¥2.37b in the last twelve months, we think its profit result of CN¥184.8m was more important. One positive is that it has grown both its profit and its revenue, over the last few years, though not in the last twelve months.

View our latest analysis for Dalipal Holdings

Of course, when it comes to statutory profit, the devil is often in the detail, and we can get a better sense for a company by diving deeper into the financial statements. This article will discuss how unusual items have impacted Dalipal Holdings' most recent profit results. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Dalipal Holdings.

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Dalipal Holdings' profit was reduced by CN¥39m, due to unusual items, over the last year. 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, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Dalipal Holdings to produce a higher profit next year, all else being equal.

Our Take On Dalipal Holdings' Profit Performance

Because unusual items detracted from Dalipal Holdings' earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Dalipal Holdings' statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in the last twelve months. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example, we've found that Dalipal Holdings has 2 warning signs (1 doesn't sit too well with us!) that deserve your attention before going any further with your analysis.

This note has only looked at a single factor that sheds light on the nature of Dalipal Holdings' profit. But there are plenty of other ways to inform your opinion of a company. 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. 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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