Shanghai QiFan Cable's (SHSE:605222) Anemic Earnings Might Be Worse Than You Think

A lackluster earnings announcement from Shanghai QiFan Cable Co., Ltd (SHSE:605222) last week didn't sink the stock price. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

See our latest analysis for Shanghai QiFan Cable

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Shanghai QiFan Cable's profit received a boost of CN¥121m 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. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. Which is hardly surprising, given the name. Shanghai QiFan Cable had a rather significant contribution from unusual items relative to its profit to September 2024. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

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.

Our Take On Shanghai QiFan Cable's Profit Performance

As we discussed above, we think the significant positive unusual item makes Shanghai QiFan Cable's earnings a poor guide to its underlying profitability. For this reason, we think that Shanghai QiFan Cable's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. Sadly, its EPS was down over the last twelve months. 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. So while earnings quality is important, it's equally important to consider the risks facing Shanghai QiFan Cable at this point in time. To help with this, we've discovered 4 warning signs (1 is significant!) that you ought to be aware of before buying any shares in Shanghai QiFan Cable.

This note has only looked at a single factor that sheds light on the nature of Shanghai QiFan Cable'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. 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.