Earnings Troubles May Signal Larger Issues for Shandong Zhangqiu Blower (SZSE:002598) Shareholders

The subdued market reaction suggests that Shandong Zhangqiu Blower Co., Ltd's (SZSE:002598) recent earnings didn't contain any surprises. We think that investors are worried about some weaknesses underlying the earnings.

Check out our latest analysis for Shandong Zhangqiu Blower

How Do Unusual Items Influence Profit?

For anyone who wants to understand Shandong Zhangqiu Blower's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥18m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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 that's as you'd expect, given these boosts are described as 'unusual'. If Shandong Zhangqiu Blower doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Shandong Zhangqiu Blower.

Our Take On Shandong Zhangqiu Blower's Profit Performance

We'd posit that Shandong Zhangqiu Blower's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that Shandong Zhangqiu Blower's statutory profits are better than its underlying earnings power. Nonetheless, it's still worth noting that its earnings per share have grown at 16% over the last three years. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. In terms of investment risks, we've identified 1 warning sign with Shandong Zhangqiu Blower, and understanding this should be part of your investment process.

Today we've zoomed in on a single data point to better understand the nature of Shandong Zhangqiu Blower'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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com