Southeast Asia Properties & Finance Limited's (HKG:252) solid earnings announcement recently didn't do much to the stock price. We did some digging, and we think that investors are missing some encouraging factors in the underlying numbers.

How Do Unusual Items Influence Profit?

For anyone who wants to understand Southeast Asia Properties & Finance's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by HK$228m 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. Southeast Asia Properties & Finance took a rather significant hit from unusual items in the year to March 2024. All else being equal, this would likely have the effect of making the statutory profit look worse than its underlying earnings power.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Southeast Asia Properties & Finance.

Our Take On Southeast Asia Properties & Finance's Profit Performance

As we discussed above, we think the significant unusual expense will make Southeast Asia Properties & Finance's statutory profit lower than it would otherwise have been. Because of this, we think Southeast Asia Properties & Finance's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! Better yet, its EPS are growing strongly, which is nice to see. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. So while earnings quality is important, it's equally important to consider the risks facing Southeast Asia Properties & Finance at this point in time. For example - Southeast Asia Properties & Finance has 2 warning signs we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Southeast Asia Properties & Finance's profit. But there are plenty of other ways to inform your opinion of a company. 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 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.

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