Oriental Enterprise Holdings' (HKG:18) Soft Earnings Are Actually Better Than They Appear

Shareholders appeared unconcerned with Oriental Enterprise Holdings Limited's (HKG:18) lackluster earnings report last week. We did some digging, and we believe the earnings are stronger than they seem.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

How Do Unusual Items Influence Profit?

For anyone who wants to understand Oriental Enterprise Holdings' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by HK$12m due 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, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Oriental Enterprise Holdings 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 Oriental Enterprise Holdings.

Our Take On Oriental Enterprise Holdings' Profit Performance

Because unusual items detracted from Oriental Enterprise Holdings' earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Oriental Enterprise Holdings' 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. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. If you'd like to know more about Oriental Enterprise Holdings as a business, it's important to be aware of any risks it's facing. At Simply Wall St, we found 1 warning sign for Oriental Enterprise Holdings and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of Oriental Enterprise Holdings' 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 with significant insider holdings to be useful.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.