Soft earnings didn't appear to concern Karrie International Holdings Limited's (HKG:1050) shareholders over the last week. We did some digging, and we believe the earnings are stronger than they seem.

How Do Unusual Items Influence Profit?

For anyone who wants to understand Karrie International Holdings' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by HK$36m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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. If Karrie International Holdings doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

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

Our Take On Karrie International Holdings' Profit Performance

Because unusual items detracted from Karrie International Holdings' earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Karrie International 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. 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 Karrie International Holdings as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 2 warning signs for Karrie International Holdings (of which 1 can't be ignored!) you should know about.

This note has only looked at a single factor that sheds light on the nature of Karrie International Holdings' profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.

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