We Think That There Are More Issues For NetDragon Websoft Holdings (HKG:777) Than Just Sluggish Earnings

Investors were disappointed by NetDragon Websoft Holdings Limited's (HKG:777 ) latest earnings release. Our analysis has found some reasons to be concerned, beyond the weak headline numbers.

Check out our latest analysis for NetDragon Websoft Holdings

The Impact Of Unusual Items On Profit

For anyone who wants to understand NetDragon Websoft Holdings' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥75m worth of unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. 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'. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On NetDragon Websoft Holdings' Profit Performance

We'd posit that NetDragon Websoft Holdings' statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that NetDragon Websoft Holdings' statutory profits are better than its underlying earnings power. In further bad news, its earnings per share decreased in 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 want to do dive deeper into NetDragon Websoft Holdings, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 1 warning sign for NetDragon Websoft Holdings and you'll want to know about it.

This note has only looked at a single factor that sheds light on the nature of NetDragon Websoft 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 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.