We Like Shanghai Urban Architecture Design's (SZSE:300983) Earnings For More Than Just Statutory Profit

The market seemed underwhelmed by last week's earnings announcement from Shanghai Urban Architecture Design Co., Ltd. (SZSE:300983) despite the healthy numbers. We did some analysis to find out why and believe that investors might be missing some encouraging factors contained in the earnings.

See our latest analysis for Shanghai Urban Architecture Design

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Shanghai Urban Architecture Design's profit was reduced by CN¥2.5m, due to unusual items, over the last year. 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 that's hardly a surprise given these line items are considered unusual. In the twelve months to June 2024, Shanghai Urban Architecture Design 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.

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

Our Take On Shanghai Urban Architecture Design's Profit Performance

As we mentioned previously, the Shanghai Urban Architecture Design's profit was hampered by unusual items in the last year. Because of this, we think Shanghai Urban Architecture Design's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! And it's also positive that the company showed enough improvement to book a profit this year, after losing money last year. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Every company has risks, and we've spotted 1 warning sign for Shanghai Urban Architecture Design you should know about.

This note has only looked at a single factor that sheds light on the nature of Shanghai Urban Architecture Design'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.