Great Wall Pan Asia Holdings' (HKG:583) Shareholders Have More To Worry About Than Only Soft Earnings

Great Wall Pan Asia Holdings Limited's (HKG:583) recent weak earnings report didn't cause a big stock movement. We think that investors are worried about some weaknesses underlying the earnings.

See our latest analysis for Great Wall Pan Asia Holdings

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Great Wall Pan Asia Holdings' profit received a boost of HK$75m in unusual items, over the last year. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. 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).

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Great Wall Pan Asia Holdings.

Our Take On Great Wall Pan Asia Holdings' Profit Performance

Arguably, Great Wall Pan Asia Holdings' statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Great Wall Pan Asia Holdings' true underlying earnings power is actually less than its statutory profit. Sadly, its EPS was down over the last twelve months. 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. So while earnings quality is important, it's equally important to consider the risks facing Great Wall Pan Asia Holdings at this point in time. Our analysis shows 4 warning signs for Great Wall Pan Asia Holdings (2 are potentially serious!) and we strongly recommend you look at them before investing.

Today we've zoomed in on a single data point to better understand the nature of Great Wall Pan Asia Holdings' profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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 that insiders are buying.

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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.