COSCO SHIPPING International (Hong Kong)'s (HKG:517) Profits Appear To Have Quality Issues

The recent earnings posted by COSCO SHIPPING International (Hong Kong) Co., Ltd. (HKG:517) were solid, but the stock didn't move as much as we expected. However the statutory profit number doesn't tell the whole story, and we have found some factors which might be of concern to shareholders.

Check out our latest analysis for COSCO SHIPPING International (Hong Kong)

How Do Unusual Items Influence Profit?

For anyone who wants to understand COSCO SHIPPING International (Hong Kong)'s profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from HK$22m worth of unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. 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. If COSCO SHIPPING International (Hong Kong) 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 COSCO SHIPPING International (Hong Kong).

Our Take On COSCO SHIPPING International (Hong Kong)'s Profit Performance

Arguably, COSCO SHIPPING International (Hong Kong)'s statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that COSCO SHIPPING International (Hong Kong)'s true underlying earnings power is actually less than its statutory profit. And we are pleased to note that EPS is at least heading in the right direction in the alst twelve months. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. If you'd like to know more about COSCO SHIPPING International (Hong Kong) as a business, it's important to be aware of any risks it's facing. In terms of investment risks, we've identified 1 warning sign with COSCO SHIPPING International (Hong Kong), and understanding this should be part of your investment process.

Today we've zoomed in on a single data point to better understand the nature of COSCO SHIPPING International (Hong Kong)'s profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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 for stocks to buy, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all 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.