Solid Earnings May Not Tell The Whole Story For Nanfang Communication Holdings (HKG:1617)

The stock price didn't jump after Nanfang Communication Holdings Limited (HKG:1617) posted decent earnings last week. We think that investors might be worried about some concerning underlying factors.

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How Do Unusual Items Influence Profit?

Importantly, our data indicates that Nanfang Communication Holdings' profit received a boost of CN¥25m in unusual items, over the last year. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. Which is hardly surprising, given the name. We can see that Nanfang Communication Holdings' positive unusual items were quite significant relative to its profit in the year to June 2025. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

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

Our Take On Nanfang Communication Holdings' Profit Performance

As previously mentioned, Nanfang Communication Holdings' large boost from unusual items won't be there indefinitely, so its statutory earnings are probably a poor guide to its underlying profitability. As a result, we think it may well be the case that Nanfang Communication Holdings' underlying earnings power is lower than its statutory profit. But the happy news is that, while acknowledging we have to look beyond the statutory numbers, those numbers are still improving, with EPS growing at a very high rate over the 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 Nanfang Communication Holdings as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 3 warning signs for Nanfang Communication Holdings you should be aware of.

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