Shareholders appeared unconcerned with Kwong Man Kee Group Limited's (HKG:8023) lackluster earnings report last week. We think that the softer headline numbers might be getting counterbalanced by some positive underlying factors.

The Impact Of Unusual Items On Profit

For anyone who wants to understand Kwong Man Kee Group's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by HK$2.6m due 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. 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 Kwong Man Kee Group 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 Kwong Man Kee Group.

Our Take On Kwong Man Kee Group's Profit Performance

Because unusual items detracted from Kwong Man Kee Group's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Kwong Man Kee Group's statutory profit actually understates its earnings potential! 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. If you'd like to know more about Kwong Man Kee Group as a business, it's important to be aware of any risks it's facing. For example - Kwong Man Kee Group has 1 warning sign we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Kwong Man Kee Group's 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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.

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