Statutory Profit Doesn't Reflect How Good Trigiant Group's (HKG:1300) Earnings Are

Trigiant Group Limited (HKG:1300) just reported healthy earnings but the stock price didn't move much. We think that investors have missed some encouraging factors underlying the profit figures.

See our latest analysis for Trigiant Group

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Trigiant Group's profit was reduced by CN¥154m, 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. In the twelve months to June 2021, Trigiant Group had a big unusual items expense. All else being equal, this would likely have the effect of making the statutory profit look worse than its underlying earnings power.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Trigiant Group.

Our Take On Trigiant Group's Profit Performance

As we discussed above, we think the significant unusual expense will make Trigiant Group's statutory profit lower than it would otherwise have been. Because of this, we think Trigiant Group's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! And it's also positive that the company showed enough improvement to book a profit this year, after losing money 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. So while earnings quality is important, it's equally important to consider the risks facing Trigiant Group at this point in time. Be aware that Trigiant Group is showing 3 warning signs in our investment analysis and 2 of those can't be ignored...

This note has only looked at a single factor that sheds light on the nature of Trigiant Group's 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. 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 that insiders are buying 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.
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