Broadly speaking, profitable businesses are less risky than unprofitable ones. However, sometimes companies receive a one-off boost (or reduction) to their profit, and it's not always clear whether statutory profits are a good guide, going forward. This article will consider whether Come Sure Group (Holdings)'s (HKG:794) statutory profits are a good guide to its underlying earnings.
We like the fact that Come Sure Group (Holdings) made a profit of HK$12.0m on its revenue of HK$1.01b, in the last year. As you can see in the chart below, its profit has declined over the last three years, even though its revenue has increased.
Not all profits are equal, and we can learn more about the nature of a company's past profitability by diving deeper into the financial statements. This article will focus on the impact unusual items have had on Come Sure Group (Holdings)'s statutory earnings. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Come Sure Group (Holdings).
How Do Unusual Items Influence Profit?
To properly understand Come Sure Group (Holdings)'s profit results, we need to consider the HK$17m expense attributed to unusual items. 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 Come Sure Group (Holdings) to produce a higher profit next year, all else being equal.
Our Take On Come Sure Group (Holdings)'s Profit Performance
Because unusual items detracted from Come Sure Group (Holdings)'s earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Come Sure Group (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. 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'd like to know more about Come Sure Group (Holdings) as a business, it's important to be aware of any risks it's facing. To that end, you should learn about the 4 warning signs we've spotted with Come Sure Group (Holdings) (including 1 which is concerning).
This note has only looked at a single factor that sheds light on the nature of Come Sure Group (Holdings)'s profit. But there are plenty of other ways to inform your opinion of a company. 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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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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