Some Investors May Be Willing To Look Past Termbray Industries International (Holdings)'s (HKG:93) Soft Earnings

Shareholders appeared unconcerned with Termbray Industries International (Holdings) Limited's (HKG:93) lackluster earnings report last week. We did some digging, and we believe the earnings are stronger than they seem.

See our latest analysis for Termbray Industries International (Holdings)

How Do Unusual Items Influence Profit?

To properly understand Termbray Industries International (Holdings)'s profit results, we need to consider the HK$10m expense attributed 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 Termbray Industries International (Holdings) doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Termbray Industries International (Holdings).

Our Take On Termbray Industries International (Holdings)'s Profit Performance

Because unusual items detracted from Termbray Industries International (Holdings)'s 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 Termbray Industries International (Holdings)'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. If you'd like to know more about Termbray Industries International (Holdings) as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 2 warning signs for Termbray Industries International (Holdings) you should know about.

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