Shareholders Will Be Pleased With The Quality of Town Health International Medical Group's (HKG:3886) Earnings

Even though Town Health International Medical Group Limited (HKG:3886 ) posted strong earnings, investors appeared to be underwhelmed. We have done some analysis and have found some comforting factors beneath the profit numbers.

See our latest analysis for Town Health International Medical Group

The Impact Of Unusual Items On Profit

For anyone who wants to understand Town Health International Medical Group's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by HK$37m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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 Town Health International Medical Group to produce a higher profit next year, all else being equal.

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

Our Take On Town Health International Medical Group's Profit Performance

Because unusual items detracted from Town Health International Medical Group's 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 Town Health International Medical Group's statutory profit actually understates its earnings potential! And it's also positive that the company showed enough improvement to book a profit this year, after 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. If you want to do dive deeper into Town Health International Medical Group, you'd also look into what risks it is currently facing. Case in point: We've spotted 2 warning signs for Town Health International Medical Group you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Town Health International Medical Group's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. 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.