We Think Wharf (Holdings)'s (HKG:4) Profit Is Only A Baseline For What They Can Achieve

The subdued stock price reaction suggests that The Wharf (Holdings) Limited's (HKG:4) strong earnings didn't offer any surprises. Investors are probably missing some underlying factors which are encouraging for the future of the company.

Check out our latest analysis for Wharf (Holdings)

The Impact Of Unusual Items On Profit

For anyone who wants to understand Wharf (Holdings)'s profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by HK$2.3b due to unusual items. 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, after all, that's exactly what the accounting terminology implies. If Wharf (Holdings) 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 Wharf (Holdings)'s Profit Performance

Unusual items (expenses) detracted from Wharf (Holdings)'s earnings over the last year, but we might see an improvement next year. Because of this, we think Wharf (Holdings)'s earnings potential is at least as good as it seems, and maybe even better! And one can definitely find a positive in the fact that it made a profit this year, despite losing money 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 Wharf (Holdings), you'd also look into what risks it is currently facing. Case in point: We've spotted 1 warning sign for Wharf (Holdings) you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Wharf (Holdings)'s 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. 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.