Shanghai Waigaoqiao Free Trade Zone Group's (SHSE:600648) Shareholders Have More To Worry About Than Only Soft Earnings

Shanghai Waigaoqiao Free Trade Zone Group Co., Ltd.'s (SHSE:600648) recent weak earnings report didn't cause a big stock movement. We think that investors are worried about some weaknesses underlying the earnings.

See our latest analysis for Shanghai Waigaoqiao Free Trade Zone Group

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Shanghai Waigaoqiao Free Trade Zone Group's profit received a boost of CN¥193m in unusual items, over the last year. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Shanghai Waigaoqiao Free Trade Zone Group.

Our Take On Shanghai Waigaoqiao Free Trade Zone Group's Profit Performance

We'd posit that Shanghai Waigaoqiao Free Trade Zone Group's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that Shanghai Waigaoqiao Free Trade Zone Group's true underlying earnings power is actually less than its statutory profit. Sadly, its EPS was down 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'd like to know more about Shanghai Waigaoqiao Free Trade Zone Group as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 4 warning signs for Shanghai Waigaoqiao Free Trade Zone Group (of which 1 can't be ignored!) you should know about.

This note has only looked at a single factor that sheds light on the nature of Shanghai Waigaoqiao Free Trade Zone Group's 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. 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.