The market seemed underwhelmed by last week's earnings announcement from Hotel Grand Central Limited (SGX:H18) despite the healthy numbers. We did some analysis to find out why and believe that investors might be missing some encouraging factors contained in the earnings.

View our latest analysis for Hotel Grand Central

How Do Unusual Items Influence Profit?

To properly understand Hotel Grand Central's profit results, we need to consider the S$7.9m 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. In the twelve months to June 2024, Hotel Grand Central had a big unusual items expense. 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 Hotel Grand Central.

Our Take On Hotel Grand Central's Profit Performance

As we mentioned previously, the Hotel Grand Central's profit was hampered by unusual items in the last year. Based on this observation, we consider it possible that Hotel Grand Central's statutory profit actually understates its earnings potential! And the EPS is up 53% over the last twelve months. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. If you want to do dive deeper into Hotel Grand Central, you'd also look into what risks it is currently facing. To that end, you should learn about the 3 warning signs we've spotted with Hotel Grand Central (including 2 which shouldn't be ignored).

Today we've zoomed in on a single data point to better understand the nature of Hotel Grand Central's 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. 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.