We Think Mayer Holdings' (HKG:1116) Solid Earnings Are Understated

The market seemed underwhelmed by last week's earnings announcement from Mayer Holdings Limited (HKG:1116) despite the healthy numbers. Our analysis suggests that shareholders might be missing some positive underlying factors in the earnings report.

View our latest analysis for Mayer Holdings

The Impact Of Unusual Items On Profit

To properly understand Mayer Holdings' profit results, we need to consider the CN¥7.9m expense attributed to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect Mayer Holdings 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 Mayer Holdings.

Our Take On Mayer Holdings' Profit Performance

Unusual items (expenses) detracted from Mayer Holdings' earnings over the last year, but we might see an improvement next year. Because of this, we think Mayer Holdings' earnings potential is at least as good as it seems, and maybe even better! Furthermore, it has done a great job growing EPS over 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. While conducting our analysis, we found that Mayer Holdings has 1 warning sign and it would be unwise to ignore this.

This note has only looked at a single factor that sheds light on the nature of Mayer Holdings' 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.

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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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