Solid Earnings May Not Tell The Whole Story For Shenzhen Capol International & Associatesco.Ltd (SZSE:002949)

Shenzhen Capol International & Associatesco.,Ltd (SZSE:002949) just released a solid earnings report, and the stock displayed some strength. However, we think that shareholders should be cautious as we found some worrying factors underlying the profit.

View our latest analysis for Shenzhen Capol International & Associatesco.Ltd

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Shenzhen Capol International & Associatesco.Ltd's profit received a boost of CN¥19m in unusual items, over the last year. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

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 Capol International & Associatesco.Ltd's Profit Performance

Arguably, Shenzhen Capol International & Associatesco.Ltd's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Shenzhen Capol International & Associatesco.Ltd's true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 44% EPS growth in 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 while earnings quality is important, it's equally important to consider the risks facing Shenzhen Capol International & Associatesco.Ltd at this point in time. Case in point: We've spotted 1 warning sign for Shenzhen Capol International & Associatesco.Ltd you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Shenzhen Capol International & Associatesco.Ltd'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. 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.