We Think You Should Be Aware Of Some Concerning Factors In Shanghai Sanmao Enterprise (Group)'s (SHSE:600689) Earnings

Shanghai Sanmao Enterprise (Group) Co., Ltd.'s (SHSE:600689) healthy profit numbers didn't contain any surprises for investors. We think this is due to investors looking beyond the statutory profits and being concerned with what they see.

Check out our latest analysis for Shanghai Sanmao Enterprise (Group)

The Impact Of Unusual Items On Profit

For anyone who wants to understand Shanghai Sanmao Enterprise (Group)'s profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥6.5m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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. Shanghai Sanmao Enterprise (Group) had a rather significant contribution from unusual items relative to its profit to September 2024. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Shanghai Sanmao Enterprise (Group).

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

As we discussed above, we think the significant positive unusual item makes Shanghai Sanmao Enterprise (Group)'s earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Shanghai Sanmao Enterprise (Group)'s underlying earnings power is lower than its statutory profit. But the happy news is that, while acknowledging we have to look beyond the statutory numbers, those numbers are still improving, with EPS growing at a very high rate over the 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. At Simply Wall St, we found 1 warning sign for Shanghai Sanmao Enterprise (Group) and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of Shanghai Sanmao Enterprise (Group)'s profit. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.