Maike Tube Industry Holdings (HKG:1553) Is Growing Earnings But Are They A Good Guide?

Statistically speaking, it is less risky to invest in profitable companies than in unprofitable ones. That said, the current statutory profit is not always a good guide to a company's underlying profitability. Today we'll focus on whether this year's statutory profits are a good guide to understanding Maike Tube Industry Holdings (HKG:1553).

It's good to see that over the last twelve months Maike Tube Industry Holdings made a profit of CN¥94.7m on revenue of CN¥1.15b. Happily, it has grown both its profit and revenue over the last three years, as you can see in the chart below.

View our latest analysis for Maike Tube Industry Holdings

Of course, it is only sensible to look beyond the statutory profits and question how well those numbers represent the sustainable earnings power of the business. This article will discuss how unusual items have impacted Maike Tube Industry Holdings' most recent profit results. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Maike Tube Industry Holdings.

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Maike Tube Industry Holdings' profit was reduced by CN¥16m, due to unusual items, over the last year. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. 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 Maike Tube Industry Holdings to produce a higher profit next year, all else being equal.

Our Take On Maike Tube Industry Holdings' Profit Performance

Unusual items (expenses) detracted from Maike Tube Industry Holdings' earnings over the last year, but we might see an improvement next year. Because of this, we think Maike Tube Industry Holdings' earnings potential is at least as good as it seems, and maybe even better! And the EPS is up 68% annually, over the last three years. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. 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. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Maike Tube Industry Holdings.

Today we've zoomed in on a single data point to better understand the nature of Maike Tube Industry Holdings' 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. 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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