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

Soft earnings didn't appear to concern Computer And Technologies Holdings Limited's (HKG:46) shareholders over the last week. We think that the softer headline numbers might be getting counterbalanced by some positive underlying factors.

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How Do Unusual Items Influence Profit?

To properly understand Computer And Technologies Holdings' profit results, we need to consider the HK$4.9m expense attributed to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. 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. Based on this observation, we consider it likely that Computer And Technologies Holdings' statutory profit actually understates its earnings potential! Unfortunately, though, its earnings per share actually fell back over the last year. 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. If you'd like to know more about Computer And Technologies Holdings as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 3 warning signs for Computer And Technologies Holdings (of which 1 can't be ignored!) you should know about.

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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.