Shenzhen Ridge Engineering Consulting's (SZSE:300977) Soft Earnings Don't Show The Whole Picture

Shenzhen Ridge Engineering Consulting Co., Ltd.'s (SZSE:300977) stock was strong despite it releasing a soft earnings report last week. Our analysis suggests that investors may have noticed some promising signs beyond the statutory profit figures.

View our latest analysis for Shenzhen Ridge Engineering Consulting

The Impact Of Unusual Items On Profit

To properly understand Shenzhen Ridge Engineering Consulting's profit results, we need to consider the CN¥20m expense attributed 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 that's hardly a surprise given these line items are considered unusual. In the twelve months to June 2024, Shenzhen Ridge Engineering Consulting 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.

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 Shenzhen Ridge Engineering Consulting's Profit Performance

As we mentioned previously, the Shenzhen Ridge Engineering Consulting's profit was hampered by unusual items in the last year. Because of this, we think Shenzhen Ridge Engineering Consulting's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For instance, we've identified 4 warning signs for Shenzhen Ridge Engineering Consulting (2 are concerning) you should be familiar with.

Today we've zoomed in on a single data point to better understand the nature of Shenzhen Ridge Engineering Consulting's profit. But there are plenty of other ways to inform your opinion of a company. 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 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.