Many investors consider it preferable to invest in profitable companies over unprofitable ones, because profitability suggests a business is sustainable. That said, the current statutory profit is not always a good guide to a company’s underlying profitability. This article will consider whether ManpowerGroup Greater China‘s (HKG:2180) statutory profits are a good guide to its underlying earnings.
It’s good to see that over the last twelve months ManpowerGroup Greater China made a profit of CN¥91.6m on revenue of CN¥2.83b.
View our latest analysis for ManpowerGroup Greater China
Of course, it is only sensible to look beyond the statutory profits and question how well those numbers represent the sustainable earnings power of the business. This article will focus on the impact unusual items have had on ManpowerGroup Greater China’s statutory earnings. 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.
How Do Unusual Items Influence Profit?
For anyone who wants to understand ManpowerGroup Greater China’s profit beyond the statutory numbers, it’s important to note that during the last twelve months statutory profit was reduced by CN¥36m due 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. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that’s exactly what the accounting terminology implies. If ManpowerGroup Greater China doesn’t see those unusual expenses repeat, then all else being equal we’d expect its profit to increase over the coming year.
Our Take On ManpowerGroup Greater China’s Profit Performance
Because unusual items detracted from ManpowerGroup Greater China’s earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think ManpowerGroup Greater China’s earnings potential is at least as good as it seems, and maybe even better! 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. Obviously, we love to consider the historical data to inform our opinion of a company. But it can be really valuable to consider what other analysts are forecasting. So feel free to check out our free graph representing analyst forecasts.
This note has only looked at a single factor that sheds light on the nature of ManpowerGroup Greater China’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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
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January 06, 2020 at 10:12AM
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Does ManpowerGroup Greater China’s (HKG:2180) Statutory Profit Adequately Reflect Its Underlying Profit? - Simply Wall St
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