Shanghai Phoenix Enterprise (Group)'s (SHSE:600679) Strong Earnings Are Of Good Quality

When companies post strong earnings, the stock generally performs well, just like Shanghai Phoenix Enterprise (Group) Co., Ltd.'s (SHSE:600679) stock has recently. Our analysis found some more factors that we think are good for shareholders.

See our latest analysis for Shanghai Phoenix Enterprise (Group)

How Do Unusual Items Influence Profit?

For anyone who wants to understand Shanghai Phoenix Enterprise (Group)'s profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥8.3m 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 that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect Shanghai Phoenix Enterprise (Group) 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 Shanghai Phoenix Enterprise (Group).

Our Take On Shanghai Phoenix Enterprise (Group)'s Profit Performance

Because unusual items detracted from Shanghai Phoenix Enterprise (Group)'s earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Shanghai Phoenix Enterprise (Group)'s earnings potential is at least as good as it seems, and maybe even better! And it's also positive that the company showed enough improvement to book a profit this year, after losing money last year. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. 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 Phoenix Enterprise (Group) you should know about.

Today we've zoomed in on a single data point to better understand the nature of Shanghai Phoenix Enterprise (Group)'s profit. But there are plenty of other ways to inform your opinion of a company. 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.