We're Not So Sure You Should Rely on Yun Lee Marine Group Holdings' (HKG:2682) Statutory Earnings

By
Simply Wall St
Published
February 03, 2021
SEHK:2682
Source: Shutterstock

It might be old fashioned, but we really like to invest in companies that make a profit, each and every year. Having said that, sometimes statutory profit levels are not a good guide to ongoing profitability, because some short term one-off factor has impacted profit levels. Today we'll focus on whether this year's statutory profits are a good guide to understanding Yun Lee Marine Group Holdings (HKG:2682).

While Yun Lee Marine Group Holdings was able to generate revenue of HK$202.4m in the last twelve months, we think its profit result of HK$11.3m was more important. In the last few years its profit has fallen, although its revenue was steady, as you can see in the chart below.

See our latest analysis for Yun Lee Marine Group Holdings

earnings-and-revenue-history
SEHK:2682 Earnings and Revenue History February 4th 2021

Of course, when it comes to statutory profit, the devil is often in the detail, and we can get a better sense for a company by diving deeper into the financial statements. This article will discuss how unusual items have impacted Yun Lee Marine Group Holdings' most recent profit results. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Yun Lee Marine Group Holdings.

How Do Unusual Items Influence Profit?

For anyone who wants to understand Yun Lee Marine Group Holdings' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from HK$2.6m worth of unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. We can see that Yun Lee Marine Group Holdings' positive unusual items were quite significant relative to its profit in the year to September 2020. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

Our Take On Yun Lee Marine Group Holdings' Profit Performance

As we discussed above, we think the significant positive unusual item makes Yun Lee Marine Group Holdings'earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Yun Lee Marine Group Holdings' underlying earnings power is lower than its statutory profit. In further bad news, its earnings per share decreased in 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 want to do dive deeper into Yun Lee Marine Group Holdings, you'd also look into what risks it is currently facing. For example, Yun Lee Marine Group Holdings has 3 warning signs (and 1 which is significant) we think you should know about.

Today we've zoomed in on a single data point to better understand the nature of Yun Lee Marine Group Holdings' profit. But there are plenty of other ways to inform your opinion of a company. 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. 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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