Investors Can Find Comfort In Computer And Technologies Holdings' (HKG:46) Earnings Quality

The market for Computer And Technologies Holdings Limited's (HKG:46) shares didn't move much after it posted weak earnings recently. We did some digging, and we believe the earnings are stronger than they seem.

See our latest analysis for Computer And Technologies Holdings

The Impact Of Unusual Items On Profit

For anyone who wants to understand Computer And Technologies Holdings' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by HK$3.8m 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. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. 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.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Computer And Technologies Holdings.

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. 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. For instance, we've identified 3 warning signs for Computer And Technologies Holdings (1 is concerning) you should be familiar with.

This note has only looked at a single factor that sheds light on the nature of Computer And Technologies Holdings' 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. 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 with significant insider holdings to be useful.

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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.