The market for Termbray Industries International (Holdings) Limited's (HKG:93) shares didn't move much after it posted weak earnings recently. We did some digging, and we believe the earnings are stronger than they seem.

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Termbray Industries International (Holdings)'s profit was reduced by HK$10m, 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. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect Termbray Industries International (Holdings) to produce a higher profit next year, all else being equal.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Termbray Industries International (Holdings).

Our Take On Termbray Industries International (Holdings)'s Profit Performance

Unusual items (expenses) detracted from Termbray Industries International (Holdings)'s earnings over the last year, but we might see an improvement next year. Because of this, we think Termbray Industries International (Holdings)'s 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. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. You'd be interested to know, that we found 2 warning signs for Termbray Industries International (Holdings) and you'll want to know about them.

This note has only looked at a single factor that sheds light on the nature of Termbray Industries International (Holdings)'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.

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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.