The Strong Earnings Posted By Tongguan Gold Group (HKG:340) Are A Good Indication Of The Strength Of The Business

September 14, 2021
  •  Updated
December 10, 2021
SEHK:340
Source: Shutterstock

Investors were underwhelmed by the solid earnings posted by Tongguan Gold Group Limited (HKG:340) recently. We have done some analysis and have found some comforting factors beneath the profit numbers.

Check out our latest analysis for Tongguan Gold Group

earnings-and-revenue-history
SEHK:340 Earnings and Revenue History September 14th 2021

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Tongguan Gold Group's profit was reduced by HK$13m, 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 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 Tongguan Gold Group 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 Tongguan Gold Group.

Our Take On Tongguan Gold Group's Profit Performance

Unusual items (expenses) detracted from Tongguan Gold Group's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Tongguan Gold Group's statutory profit actually understates its earnings potential! And it's also positive that 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. If you want to do dive deeper into Tongguan Gold Group, you'd also look into what risks it is currently facing. At Simply Wall St, we found 1 warning sign for Tongguan Gold Group and we think they deserve your attention.

This note has only looked at a single factor that sheds light on the nature of Tongguan Gold Group's 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. 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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