We Think Glorious Sun Enterprises' (HKG:393) Healthy Earnings Might Be Conservative

Glorious Sun Enterprises Limited's (HKG:393) recent earnings report didn't offer any surprises, with the shares unchanged over the last week. Our analysis suggests that shareholders might be missing some positive underlying factors in the earnings report.

See our latest analysis for Glorious Sun Enterprises

How Do Unusual Items Influence Profit?

For anyone who wants to understand Glorious Sun Enterprises' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by HK$115m due 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. Glorious Sun Enterprises took a rather significant hit from unusual items in the year to December 2023. As a result, we can surmise that the unusual items made its statutory profit significantly weaker 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 Glorious Sun Enterprises.

Our Take On Glorious Sun Enterprises' Profit Performance

As we discussed above, we think the significant unusual expense will make Glorious Sun Enterprises' statutory profit lower than it would otherwise have been. Because of this, we think Glorious Sun Enterprises' underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! And the EPS is up 11% 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. To that end, you should learn about the 3 warning signs we've spotted with Glorious Sun Enterprises (including 2 which are potentially serious).

This note has only looked at a single factor that sheds light on the nature of Glorious Sun Enterprises' 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.