Keli Motor Group's (SZSE:002892) Soft Earnings Are Actually Better Than They Appear

The market was pleased with the recent earnings report from Keli Motor Group Co., Ltd. (SZSE:002892), despite the profit numbers being soft. Our analysis suggests that investors may have noticed some promising signs beyond the statutory profit figures.

See our latest analysis for Keli Motor Group

The Impact Of Unusual Items On Profit

For anyone who wants to understand Keli Motor Group's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥52m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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. In the twelve months to March 2024, Keli Motor Group had a big unusual items expense. All else being equal, this would likely have the effect of making the statutory profit look worse than its underlying earnings power.

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

Our Take On Keli Motor Group's Profit Performance

As we mentioned previously, the Keli Motor Group's profit was hampered by unusual items in the last year. Based on this observation, we consider it possible that Keli Motor Group's statutory profit actually understates its earnings potential! Unfortunately, though, its earnings per share actually fell back over the last year. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. To help with this, we've discovered 4 warning signs (1 makes us a bit uncomfortable!) that you ought to be aware of before buying any shares in Keli Motor Group.

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