We Think Shanghai Chuangli Group's (SHSE:603012) Healthy Earnings Might Be Conservative

Shanghai Chuangli Group Co., Ltd.'s (SHSE:603012) recent earnings report didn't offer any surprises, with the shares unchanged over the last week. Our analysis suggests that shareholders might be missing some positive underlying factors in the earnings report.

See our latest analysis for Shanghai Chuangli Group

How Do Unusual Items Influence Profit?

For anyone who wants to understand Shanghai Chuangli Group's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥65m 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. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. If Shanghai Chuangli Group doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

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

Our Take On Shanghai Chuangli Group's Profit Performance

Because unusual items detracted from Shanghai Chuangli Group'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 Shanghai Chuangli Group's earnings potential is at least as good as it seems, and maybe even better! And the EPS is up 7.9% annually, over the last three years. 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. So while earnings quality is important, it's equally important to consider the risks facing Shanghai Chuangli Group at this point in time. Every company has risks, and we've spotted 1 warning sign for Shanghai Chuangli Group you should know about.

Today we've zoomed in on a single data point to better understand the nature of Shanghai Chuangli Group's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.

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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.