We're Not So Sure You Should Rely on Star Properties Group (Cayman Islands)'s (HKG:1560) Statutory Earnings

As a general rule, we think profitable companies are less risky than companies that lose money. Having said that, sometimes statutory profit levels are not a good guide to ongoing profitability, because some short term one-off factor has impacted profit levels. This article will consider whether Star Properties Group (Cayman Islands)'s (HKG:1560) statutory profits are a good guide to its underlying earnings.

While Star Properties Group (Cayman Islands) was able to generate revenue of HK$99.9m in the last twelve months, we think its profit result of HK$359.3m was more important.

View our latest analysis for Star Properties Group (Cayman Islands)

Importantly, statutory profits are not always the best tool for understanding a company's true earnings power, so it's well worth examining profits in a little more detail. This article will discuss how unusual items have impacted Star Properties Group (Cayman Islands)'s most recent profit results. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Star Properties Group (Cayman Islands).

The Impact Of Unusual Items On Profit

For anyone who wants to understand Star Properties Group (Cayman Islands)'s profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from HK$380m worth of unusual items. 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. Star Properties Group (Cayman Islands) had a rather significant contribution from unusual items relative to its profit to June 2020. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

Our Take On Star Properties Group (Cayman Islands)'s Profit Performance

As previously mentioned, Star Properties Group (Cayman Islands)'s large boost from unusual items won't be there indefinitely, so its statutory earnings are probably a poor guide to its underlying profitability. For this reason, we think that Star Properties Group (Cayman Islands)'s statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. But at least holders can take some solace from the 75% EPS growth in 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 Star Properties Group (Cayman Islands) as a business, it's important to be aware of any risks it's facing. Be aware that Star Properties Group (Cayman Islands) is showing 4 warning signs in our investment analysis and 1 of those is concerning...

This note has only looked at a single factor that sheds light on the nature of Star Properties Group (Cayman Islands)'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. 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.
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