Why Longfor Group Holdings' (HKG:960) Shaky Earnings Are Just The Beginning Of Its Problems

Despite Longfor Group Holdings Limited's (HKG:960) recent earnings report having lackluster headline numbers, the market responded positively. We think that shareholders might be missing some concerning factors that our analysis found.

Check out our latest analysis for Longfor Group Holdings

How Do Unusual Items Influence Profit?

For anyone who wants to understand Longfor Group Holdings' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥3.3b worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's as you'd expect, given these boosts are described as 'unusual'. 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).

Our data indicates that Longfor Group Holdings insiders have been buying shares! Luckily we are in a position to provide you with this free chart of of all insider buying (and selling).

Our Take On Longfor Group Holdings' Profit Performance

Arguably, Longfor Group Holdings' statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Longfor Group Holdings' statutory profits are better than its underlying earnings power. 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. If you'd like to know more about Longfor Group Holdings as a business, it's important to be aware of any risks it's facing. Be aware that Longfor Group Holdings is showing 5 warning signs in our investment analysis and 1 of those makes us a bit uncomfortable...

Today we've zoomed in on a single data point to better understand the nature of Longfor Group Holdings' profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.