Greentech Technology International's (HKG:195) Soft Earnings Are Actually Better Than They Appear

The market for Greentech Technology International Limited's (HKG:195) shares didn't move much after it posted weak earnings recently. We think that the softer headline numbers might be getting counterbalanced by some positive underlying factors.

See our latest analysis for Greentech Technology International

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Greentech Technology International's profit was reduced by HK$33m, 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, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Greentech Technology International 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 Greentech Technology International.

Our Take On Greentech Technology International's Profit Performance

Unusual items (expenses) detracted from Greentech Technology International's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Greentech Technology International's statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in the last twelve months. 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. If you want to do dive deeper into Greentech Technology International, you'd also look into what risks it is currently facing. In terms of investment risks, we've identified 3 warning signs with Greentech Technology International, and understanding them should be part of your investment process.

Today we've zoomed in on a single data point to better understand the nature of Greentech Technology International's profit. But there are plenty of other ways to inform your opinion of a company. 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. 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.