Impressive Earnings May Not Tell The Whole Story For Shanghai Emperor of Cleaning Hi-Tech (SHSE:603200)

Despite posting some strong earnings, the market for Shanghai Emperor of Cleaning Hi-Tech Co., Ltd's (SHSE:603200) stock hasn't moved much. Our analysis suggests that this might be because shareholders have noticed some concerning underlying factors.

View our latest analysis for Shanghai Emperor of Cleaning Hi-Tech

How Do Unusual Items Influence Profit?

For anyone who wants to understand Shanghai Emperor of Cleaning Hi-Tech's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥5.0m worth of unusual items. 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 crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And, after all, that's exactly what the accounting terminology implies. If Shanghai Emperor of Cleaning Hi-Tech doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

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 Emperor of Cleaning Hi-Tech's Profit Performance

We'd posit that Shanghai Emperor of Cleaning Hi-Tech's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that Shanghai Emperor of Cleaning Hi-Tech's true underlying earnings power is actually less than its statutory profit. But on the bright side, its earnings per share have grown at an extremely impressive rate 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. Obviously, we love to consider the historical data to inform our opinion of a company. But it can be really valuable to consider what other analysts are forecasting. Luckily, you can check out what analysts are forecasting by clicking here.

Today we've zoomed in on a single data point to better understand the nature of Shanghai Emperor of Cleaning Hi-Tech'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 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.