Why KWG Living Group Holdings' (HKG:3913) Earnings Are Better Than They Seem

The stock was sluggish on the back of KWG Living Group Holdings Limited's (HKG:3913) recent earnings report. We have done some analysis, and found some encouraging factors that we believe the shareholders should consider.

Check out our latest analysis for KWG Living Group Holdings

How Do Unusual Items Influence Profit?

To properly understand KWG Living Group Holdings' profit results, we need to consider the CN¥256m expense attributed 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. In the twelve months to June 2024, KWG Living Group Holdings had a big unusual items expense. As a result, we can surmise that the unusual items made its statutory profit significantly weaker than it would otherwise be.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of KWG Living Group Holdings.

Our Take On KWG Living Group Holdings' Profit Performance

As we mentioned previously, the KWG Living Group Holdings' profit was hampered by unusual items in the last year. Because of this, we think KWG Living Group Holdings' underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! And it's also positive that the company showed enough improvement to book a profit this year, after losing money 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. If you want to do dive deeper into KWG Living Group Holdings, you'd also look into what risks it is currently facing. When we did our research, we found 3 warning signs for KWG Living Group Holdings (1 is potentially serious!) that we believe deserve your full attention.

This note has only looked at a single factor that sheds light on the nature of KWG Living Group Holdings' 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.

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.