Does Computer And Technologies Holdings's (HKG:46) Statutory Profit Adequately Reflect Its Underlying Profit?

Statistically speaking, it is less risky to invest in profitable companies than in 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 Computer And Technologies Holdings' (HKG:46) statutory profits are a good guide to its underlying earnings.

We like the fact that Computer And Technologies Holdings made a profit of HK$47.0m on its revenue of HK$259.5m, in the last year. In the last few years its profit has fallen, although its revenue was steady, as you can see in the chart below.

See our latest analysis for Computer And Technologies Holdings

Of course, it is only sensible to look beyond the statutory profits and question how well those numbers represent the sustainable earnings power of the business. This article will focus on the impact unusual items have had on Computer And Technologies Holdings' statutory earnings. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Computer And Technologies Holdings.

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Computer And Technologies Holdings' profit was reduced by HK$4.6m, due to unusual items, over the last year. 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. If Computer And Technologies Holdings doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Our Take On Computer And Technologies Holdings' Profit Performance

Because unusual items detracted from Computer And Technologies Holdings' earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Computer And Technologies Holdings' earnings potential is at least as good as it seems, and maybe even better! On the other hand, its EPS actually shrunk in the last twelve months. 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. If you want to do dive deeper into Computer And Technologies Holdings, you'd also look into what risks it is currently facing. While conducting our analysis, we found that Computer And Technologies Holdings has 2 warning signs and it would be unwise to ignore these.

This note has only looked at a single factor that sheds light on the nature of Computer And Technologies Holdings' profit. But there are plenty of other ways to inform your opinion of a company. 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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