Hutchison Telecommunications Hong Kong Holdings' (HKG:215) Conservative Accounting Might Explain Soft Earnings

Shareholders appeared unconcerned with Hutchison Telecommunications Hong Kong Holdings Limited's (HKG:215) lackluster earnings report last week. We think that the softer headline numbers might be getting counterbalanced by some positive underlying factors.

See our latest analysis for Hutchison Telecommunications Hong Kong Holdings

How Do Unusual Items Influence Profit?

To properly understand Hutchison Telecommunications Hong Kong Holdings' profit results, we need to consider the HK$85m expense attributed 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. Assuming those unusual expenses don't come up again, we'd therefore expect Hutchison Telecommunications Hong Kong Holdings to produce a higher profit next year, all else being equal.

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 Hutchison Telecommunications Hong Kong Holdings' Profit Performance

Unusual items (expenses) detracted from Hutchison Telecommunications Hong Kong Holdings' earnings over the last year, but we might see an improvement next year. Because of this, we think Hutchison Telecommunications Hong Kong 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. 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 Hutchison Telecommunications Hong Kong Holdings as a business, it's important to be aware of any risks it's facing. Our analysis shows 2 warning signs for Hutchison Telecommunications Hong Kong Holdings (1 is potentially serious!) and we strongly recommend you look at them before investing.

This note has only looked at a single factor that sheds light on the nature of Hutchison Telecommunications Hong Kong 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 that insiders are buying to be useful.

If you’re looking to trade Hutchison Telecommunications Hong Kong Holdings, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.