Polyard Petroleum International Group's (HKG:8011) Profits Appear To Have Quality Issues

The recent earnings posted by Polyard Petroleum International Group Limited (HKG:8011) were solid, but the stock didn't move as much as we expected. We think this is due to investors looking beyond the statutory profits and being concerned with what they see.

See our latest analysis for Polyard Petroleum International Group

The Impact Of Unusual Items On Profit

To properly understand Polyard Petroleum International Group's profit results, we need to consider the HK$9.8m gain attributed to unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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. And, after all, that's exactly what the accounting terminology implies. Polyard Petroleum International Group had a rather significant contribution from unusual items relative to its profit to June 2022. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Polyard Petroleum International Group.

Our Take On Polyard Petroleum International Group's Profit Performance

As we discussed above, we think the significant positive unusual item makes Polyard Petroleum International Group's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Polyard Petroleum International Group's underlying earnings power is lower than its statutory profit. On the bright side, the company showed enough improvement to book a profit this year, after losing money last year. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. If you'd like to know more about Polyard Petroleum International Group as a business, it's important to be aware of any risks it's facing. To that end, you should learn about the 3 warning signs we've spotted with Polyard Petroleum International Group (including 1 which doesn't sit too well with us).

This note has only looked at a single factor that sheds light on the nature of Polyard Petroleum International 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.