China Post Technology's (SHSE:688648) Soft Earnings Are Actually Better Than They Appear

Investors were disappointed with the weak earnings posted by China Post Technology Co., Ltd. (SHSE:688648 ). Despite the soft profit numbers, our analysis has optimistic about the overall quality of the income statement.

Check out our latest analysis for China Post Technology

The Impact Of Unusual Items On Profit

To properly understand China Post Technology's profit results, we need to consider the CN¥20m 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. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. If China Post Technology 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 China Post Technology.

Our Take On China Post Technology's Profit Performance

Unusual items (expenses) detracted from China Post Technology's earnings over the last year, but we might see an improvement next year. Because of this, we think China Post Technology's earnings potential is at least as good as it seems, and maybe even better! On the other hand, its EPS actually shrunk in 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 China Post Technology, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 2 warning signs for China Post Technology and you'll want to know about these.

Today we've zoomed in on a single data point to better understand the nature of China Post Technology'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. 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 that insiders are buying 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.