The stock was sluggish on the back of Pacific Textiles Holdings Limited's (HKG:1382) recent earnings report. Along with the solid headline numbers, we think that investors have some reasons for optimism.

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Pacific Textiles Holdings' profit was reduced by HK$64m, due to unusual items, over the last year. 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. Assuming those unusual expenses don't come up again, we'd therefore expect Pacific Textiles Holdings to produce a higher profit next year, all else being equal.

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On Pacific Textiles Holdings' Profit Performance

Unusual items (expenses) detracted from Pacific Textiles Holdings' earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Pacific Textiles Holdings' statutory profit actually understates its earnings potential! 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For instance, we've identified 2 warning signs for Pacific Textiles Holdings (1 is a bit concerning) you should be familiar with.

Today we've zoomed in on a single data point to better understand the nature of Pacific Textiles 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 with significant insider holdings 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.