Transmit Entertainment (HKG:1326) Posted Healthy Earnings But There Are Some Other Factors To Be Aware Of

Simply Wall St
March 17, 2022
Source: Shutterstock

Despite posting some strong earnings, the market for Transmit Entertainment Limited's (HKG:1326) stock hasn't moved much. Our analysis suggests that shareholders have noticed something concerning in the numbers.

Check out our latest analysis for Transmit Entertainment

SEHK:1326 Earnings and Revenue History March 17th 2022

The Impact Of Unusual Items On Profit

For anyone who wants to understand Transmit Entertainment's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from HK$125m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's as you'd expect, given these boosts are described as 'unusual'. Transmit Entertainment had a rather significant contribution from unusual items relative to its profit to December 2021. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Transmit Entertainment.

Our Take On Transmit Entertainment's Profit Performance

As we discussed above, we think the significant positive unusual item makes Transmit Entertainment's earnings a poor guide to its underlying profitability. For this reason, we think that Transmit Entertainment's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. On the bright side, the company showed enough improvement to book a profit this year, after losing money 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example - Transmit Entertainment has 2 warning signs we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Transmit Entertainment'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.

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.