Should You Rely On Skyfame Realty (Holdings)'s (HKG:59) Earnings Growth?

Broadly speaking, profitable businesses are less risky than unprofitable ones. That said, the current statutory profit is not always a good guide to a company's underlying profitability. This article will consider whether Skyfame Realty (Holdings)'s (HKG:59) statutory profits are a good guide to its underlying earnings.

While Skyfame Realty (Holdings) was able to generate revenue of CN¥6.74b in the last twelve months, we think its profit result of CN¥734.5m was more important. One positive is that it has grown both its profit and its revenue, over the last few years.

See our latest analysis for Skyfame Realty (Holdings)

Of course, when it comes to statutory profit, the devil is often in the detail, and we can get a better sense for a company by diving deeper into the financial statements. This article will discuss how unusual items have impacted Skyfame Realty (Holdings)'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 Skyfame Realty (Holdings).

The Impact Of Unusual Items On Profit

For anyone who wants to understand Skyfame Realty (Holdings)'s profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥362m 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. 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 Take On Skyfame Realty (Holdings)'s Profit Performance

We'd posit that Skyfame Realty (Holdings)'s statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that Skyfame Realty (Holdings)'s statutory profits are better than its underlying earnings power. But on the bright side, its earnings per share have grown at an extremely impressive rate over the last three years. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. To help with this, we've discovered 3 warning signs (1 can't be ignored!) that you ought to be aware of before buying any shares in Skyfame Realty (Holdings).

This note has only looked at a single factor that sheds light on the nature of Skyfame Realty (Holdings)'s profit. But there are plenty of other ways to inform your opinion of a company. 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 that insiders are buying to be useful.

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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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