Man Yue Technology Holdings' (HKG:894) Anemic Earnings Might Be Worse Than You Think

The subdued market reaction suggests that Man Yue Technology Holdings Limited's (HKG:894) recent earnings didn't contain any surprises. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

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The Impact Of Unusual Items On Profit

Importantly, our data indicates that Man Yue Technology Holdings' profit received a boost of HK$12m in unusual items, over the last year. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. Which is hardly surprising, given the name. If Man Yue Technology Holdings doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Man Yue Technology Holdings.

Our Take On Man Yue Technology Holdings' Profit Performance

Arguably, Man Yue Technology Holdings' statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Man Yue Technology Holdings' statutory profits are better than its underlying earnings power. Sadly, its EPS was down over the last twelve months. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Our analysis shows 5 warning signs for Man Yue Technology Holdings (1 is potentially serious!) and we strongly recommend you look at them before investing.

Today we've zoomed in on a single data point to better understand the nature of Man Yue Technology 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. 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.