Should You Use GDH Guangnan (Holdings)'s (HKG:1203) Statutory Earnings To Analyse It?

It might be old fashioned, but we really like to invest in companies that make a profit, each and every year. That said, the current statutory profit is not always a good guide to a company's underlying profitability. This article will consider whether GDH Guangnan (Holdings)'s (HKG:1203) statutory profits are a good guide to its underlying earnings.

While GDH Guangnan (Holdings) was able to generate revenue of HK$2.32b in the last twelve months, we think its profit result of HK$67.9m was more important. As you can see in the chart below, its profit has declined over the last three years, even though its revenue has increased.

View our latest analysis for GDH Guangnan (Holdings)

Of course, when it comes to statutory profit, the devil is often in the detail, and we can get a better sense for a company by diving deeper into the financial statements. This article will focus on the impact unusual items have had on GDH Guangnan (Holdings)'s statutory earnings. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of GDH Guangnan (Holdings).

The Impact Of Unusual Items On Profit

Importantly, our data indicates that GDH Guangnan (Holdings)'s profit was reduced by HK$10m, due to unusual items, over the last year. 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. If GDH Guangnan (Holdings) doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Our Take On GDH Guangnan (Holdings)'s Profit Performance

Unusual items (expenses) detracted from GDH Guangnan (Holdings)'s earnings over the last year, but we might see an improvement next year. Because of this, we think GDH Guangnan (Holdings)'s earnings potential is at least as good as it seems, and maybe even better! Unfortunately, though, its earnings per share actually fell back over the last year. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. If you'd like to know more about GDH Guangnan (Holdings) as a business, it's important to be aware of any risks it's facing. For instance, we've identified 3 warning signs for GDH Guangnan (Holdings) (1 makes us a bit uncomfortable) you should be familiar with.

Today we've zoomed in on a single data point to better understand the nature of GDH Guangnan (Holdings)'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. 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 that insiders are buying to be useful.

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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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