We Think Pubang Landscape Architecture's (SZSE:002663) Solid Earnings Are Understated

The market seemed underwhelmed by last week's earnings announcement from Pubang Landscape Architecture Co., Ltd (SZSE:002663) despite the healthy numbers. We did some digging, and we think that investors are missing some encouraging factors in the underlying numbers.

View our latest analysis for Pubang Landscape Architecture

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Pubang Landscape Architecture's profit was reduced by CN¥18m, due to unusual items, over the last year. 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. Assuming those unusual expenses don't come up again, we'd therefore expect Pubang Landscape Architecture to produce a higher profit next year, all else being equal.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Pubang Landscape Architecture.

Our Take On Pubang Landscape Architecture's Profit Performance

Unusual items (expenses) detracted from Pubang Landscape Architecture's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Pubang Landscape Architecture's statutory profit actually understates its earnings potential! And it's also positive that the company showed enough improvement to book a profit this year, after losing money 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. You'd be interested to know, that we found 1 warning sign for Pubang Landscape Architecture and you'll want to know about this.

This note has only looked at a single factor that sheds light on the nature of Pubang Landscape Architecture'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. 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 that insiders are buying 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.