Hang Lung Properties' (HKG:101) Soft Earnings Don't Show The Whole Picture

The market for Hang Lung Properties Limited's (HKG:101) shares didn't move much after it posted weak earnings recently. We did some digging, and we believe the earnings are stronger than they seem.

See our latest analysis for Hang Lung Properties

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Hang Lung Properties' profit was reduced by HK$869m, 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. If Hang Lung Properties doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

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 Hang Lung Properties' Profit Performance

Because unusual items detracted from Hang Lung Properties' earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Hang Lung Properties' statutory profit actually understates its earnings potential! And the EPS is up 20% annually, over the last three years. 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. To that end, you should learn about the 3 warning signs we've spotted with Hang Lung Properties (including 1 which can't be ignored).

This note has only looked at a single factor that sheds light on the nature of Hang Lung Properties' profit. But there are plenty of other ways to inform your opinion of a company. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.