Talent Property Group's (HKG:760) Profits Appear To Have Quality Issues

The stock price didn't jump after Talent Property Group Limited (HKG:760) posted decent earnings last week. Our analysis showed that there are some concerning factors in the earnings that investors may be cautious of.

Check out our latest analysis for Talent Property Group

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Talent Property Group's profit received a boost of CN¥26m in unusual items, over the last year. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. 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'. Talent Property Group had a rather significant contribution from unusual items relative to its profit to December 2021. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Talent Property Group.

Our Take On Talent Property Group's Profit Performance

As we discussed above, we think the significant positive unusual item makes Talent Property Group's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Talent Property Group's underlying earnings power is lower than its statutory profit. On the bright side, the company showed enough improvement to book a profit this year, after losing money last year. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. So while earnings quality is important, it's equally important to consider the risks facing Talent Property Group at this point in time. In terms of investment risks, we've identified 2 warning signs with Talent Property Group, and understanding them should be part of your investment process.

This note has only looked at a single factor that sheds light on the nature of Talent Property Group'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. 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.