We Think That There Are Some Issues For Tsit Wing International Holdings (HKG:2119) Beyond Its Promising Earnings

Tsit Wing International Holdings Limited's (HKG:2119) healthy profit numbers didn't contain any surprises for investors. However the statutory profit number doesn't tell the whole story, and we have found some factors which might be of concern to shareholders.

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The Impact Of Unusual Items On Profit

Importantly, our data indicates that Tsit Wing International Holdings' profit received a boost of HK$12m in unusual items, over the last year. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. 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 that's as you'd expect, given these boosts are described as 'unusual'. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Tsit Wing International Holdings .

Our Take On Tsit Wing International Holdings' Profit Performance

Arguably, Tsit Wing International Holdings' statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Tsit Wing International Holdings' true underlying earnings power is actually less than its statutory profit. The good news is that, its earnings per share increased by 21% in the 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. To that end, you should learn about the 3 warning signs we've spotted with Tsit Wing International Holdings (including 1 which is significant) .

Today we've zoomed in on a single data point to better understand the nature of Tsit Wing International 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 with significant insider holdings 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.