Henglin Home FurnishingsLtd's (SHSE:603661) Soft Earnings Don't Show The Whole Picture

Soft earnings didn't appear to concern Henglin Home Furnishings Co.,Ltd's (SHSE:603661) shareholders over the last week. We did some digging, and we believe the earnings are stronger than they seem.

View our latest analysis for Henglin Home FurnishingsLtd

The Impact Of Unusual Items On Profit

For anyone who wants to understand Henglin Home FurnishingsLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥83m due 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 Henglin Home FurnishingsLtd doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming 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 Henglin Home FurnishingsLtd's Profit Performance

Unusual items (expenses) detracted from Henglin Home FurnishingsLtd's earnings over the last year, but we might see an improvement next year. Because of this, we think Henglin Home FurnishingsLtd'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. 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 while earnings quality is important, it's equally important to consider the risks facing Henglin Home FurnishingsLtd at this point in time. For example - Henglin Home FurnishingsLtd has 2 warning signs we think you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Henglin Home FurnishingsLtd'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 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.