Stock Analysis

Kaisa Health Group Holdings' (HKG:876) Profits Appear To Have Quality Issues

SEHK:876
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The recent earnings posted by Kaisa Health Group Holdings Limited (HKG:876) were solid, but the stock didn't move as much as we expected. However the statutory profit number doesn't tell the whole story, and we have found some factors which might be of concern to shareholders.

View our latest analysis for Kaisa Health Group Holdings

earnings-and-revenue-history
SEHK:876 Earnings and Revenue History October 5th 2021

How Do Unusual Items Influence Profit?

To properly understand Kaisa Health Group Holdings' profit results, we need to consider the HK$30m gain attributed to unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. We can see that Kaisa Health Group Holdings' positive unusual items were quite significant relative to its profit in the year to June 2021. 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 Kaisa Health Group Holdings.

Our Take On Kaisa Health Group Holdings' Profit Performance

As we discussed above, we think the significant positive unusual item makes Kaisa Health Group Holdings' earnings a poor guide to its underlying profitability. For this reason, we think that Kaisa Health Group Holdings' statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. On the bright side, 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. 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. Case in point: We've spotted 2 warning signs for Kaisa Health Group Holdings you should be aware of.

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

Valuation is complex, but we're here to simplify it.

Discover if Kaisa Health Group Holdings might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.

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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.

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