Should You Use BII Railway Transportation Technology Holdings's (HKG:1522) Statutory Earnings To Analyse It?

As a general rule, we think profitable companies are less risky than companies that lose money. That said, the current statutory profit is not always a good guide to a company's underlying profitability. In this article, we'll look at how useful this year's statutory profit is, when analysing BII Railway Transportation Technology Holdings (HKG:1522).

We like the fact that BII Railway Transportation Technology Holdings made a profit of HK$70.1m on its revenue of HK$1.23b, in the last year. In the chart below, you can see that its profit and revenue have both grown over the last three years, although its profit has slipped in the last twelve months.

See our latest analysis for BII Railway Transportation Technology 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 focus on the impact unusual items have had on BII Railway Transportation Technology Holdings' statutory earnings. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of BII Railway Transportation Technology Holdings.

How Do Unusual Items Influence Profit?

For anyone who wants to understand BII Railway Transportation Technology Holdings' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by HK$16m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect BII Railway Transportation Technology Holdings to produce a higher profit next year, all else being equal.

Our Take On BII Railway Transportation Technology Holdings' Profit Performance

Because unusual items detracted from BII Railway Transportation Technology Holdings' earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that BII Railway Transportation Technology Holdings' statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at an extremely impressive rate over the last three years. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. If you want to do dive deeper into BII Railway Transportation Technology Holdings, you'd also look into what risks it is currently facing. At Simply Wall St, we found 3 warning signs for BII Railway Transportation Technology Holdings and we think they deserve your attention.

This note has only looked at a single factor that sheds light on the nature of BII Railway Transportation Technology 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. 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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