Investors Can Find Comfort In FIT Hon Teng's (HKG:6088) Earnings Quality

Soft earnings didn't appear to concern FIT Hon Teng Limited's (HKG:6088) shareholders over the last week. We did some digging, and we believe the earnings are stronger than they seem.

View our latest analysis for FIT Hon Teng

How Do Unusual Items Influence Profit?

Importantly, our data indicates that FIT Hon Teng's profit was reduced by US$46m, 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. 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 FIT Hon Teng doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On FIT Hon Teng's Profit Performance

Because unusual items detracted from FIT Hon Teng's 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 FIT Hon Teng's statutory profit actually understates its earnings potential! 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example, FIT Hon Teng has 4 warning signs (and 1 which is a bit concerning) we think you should know about.

This note has only looked at a single factor that sheds light on the nature of FIT Hon Teng'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. 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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