Haichang Ocean Park Holdings (HKG: 2255) Strong earnings come with weak fundamentals

Haichang Ocean Park Holdings Ltd. (HKG:2255) The stock was strong after reporting strong earnings. However, our analysis suggests that shareholders may be missing out on some factors indicating that the earnings outcome was not as good as it looked.

See our latest analysis for Haichang Ocean Park Holdings

SEHK: 2255 Earnings & Revenue History May 5, 2022

The impact of unusual items on earnings

For anyone wishing to understand the profits of Haichang Ocean Park Holdings beyond the statutory figures, it is important to note that over the past twelve months, statutory profits have been generated by unusual items with a value of 1 .8 billion yen. While we like to see increases in earnings, we tend to be a little more cautious when unusual items have made a big contribution. We have analyzed the figures of most publicly traded companies around the world, and it is very common for unusual items to be unique in nature. And that’s as you’d expect, given that these boosts are described as “unusual.” Haichang Ocean Park Holdings had a fairly large contribution of unusual items to its earnings through December 2021. All other things being equal, this would likely make statutory earnings a poor indicator of earning power under -lying.

This might make you wonder what analysts predict in terms of future profitability. Luckily, you can click here to see an interactive chart outlining future profitability, based on their estimates.

Our view on the earnings performance of Haichang Ocean Park Holdings

As mentioned above, we believe that the large positive unusual item makes Haichang Ocean Park Holdings’ earnings a poor indicator of its underlying profitability. For this reason, we believe Haichang Ocean Park Holdings’ statutory earnings may be a poor indicator of its underlying earning power and could give investors an overly positive impression of the company. The good news is that it has made a profit in the last twelve months, despite its previous loss. Ultimately, it is essential to consider more than the above factors, if you want to fully understand the business. With this in mind, we would not consider investing in a stock unless we have a thorough understanding of the risks. When we did our research, we found 4 warning signs for Haichang Ocean Park Holdings (2 are significant!) which we believe deserve your full attention.

Today, we zoomed in on a single data point to better understand the nature of Haichang Ocean Park Holdings’ earnings. But there are many other ways to inform your opinion about a company. For example, many people view a high return on equity as an indication of a favorable trading economy, while others like to “follow the money” and look for stocks that insiders are buying. Although it might take a bit of research on your behalf, you might find this free collection of companies offering a high return on equity, or this list of stocks that insiders buy to be useful.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

Harold B. McConnell