Cirtek Holdings Limited's (HKG:1433) strong earnings report was rewarded with a positive stock price move. We have done some analysis, and we found several positive factors beyond the profit numbers.

How Do Unusual Items Influence Profit?

To properly understand Cirtek Holdings' profit results, we need to consider the HK$7.5m expense attributed 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. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Cirtek 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 Cirtek Holdings.

Our Take On Cirtek Holdings' Profit Performance

Because unusual items detracted from Cirtek 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 Cirtek Holdings' earnings potential is at least as good as it seems, and maybe even better! And it's also positive that the company showed enough improvement to book a profit this year, after losing money last year. 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 Cirtek Holdings as a business, it's important to be aware of any risks it's facing. To that end, you should learn about the 2 warning signs we've spotted with Cirtek Holdings (including 1 which shouldn't be ignored).

Today we've zoomed in on a single data point to better understand the nature of Cirtek 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.