Starjoy Wellness and Travel's (HKG:3662) Soft Earnings Don't Show The Whole Picture

Shareholders appeared unconcerned with Starjoy Wellness and Travel Company Limited's (HKG:3662) lackluster earnings report last week. We did some digging, and we believe the earnings are stronger than they seem.

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How Do Unusual Items Influence Profit?

Importantly, our data indicates that Starjoy Wellness and Travel's profit was reduced by CN¥32m, due to unusual items, over the last year. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. 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 Starjoy Wellness and Travel 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 Starjoy Wellness and Travel.

Our Take On Starjoy Wellness and Travel's Profit Performance

Unusual items (expenses) detracted from Starjoy Wellness and Travel's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Starjoy Wellness and Travel's statutory profit actually understates its earnings potential! Unfortunately, though, its earnings per share actually fell back over the last year. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. To help with this, we've discovered 4 warning signs (1 is a bit concerning!) that you ought to be aware of before buying any shares in Starjoy Wellness and Travel.

This note has only looked at a single factor that sheds light on the nature of Starjoy Wellness and Travel'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 with significant insider holdings 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.