Yangzhou Jinquan Travelling Goods' (SHSE:603307) Shareholders Have More To Worry About Than Only Soft Earnings

The subdued market reaction suggests that Yangzhou Jinquan Travelling Goods Co., Ltd.'s (SHSE:603307) recent earnings didn't contain any surprises. We think that investors are worried about some weaknesses underlying the earnings.

See our latest analysis for Yangzhou Jinquan Travelling Goods

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Yangzhou Jinquan Travelling Goods' profit received a boost of CN¥10m 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. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And that's as you'd expect, given these boosts are described as 'unusual'. 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 Yangzhou Jinquan Travelling Goods' Profit Performance

Arguably, Yangzhou Jinquan Travelling Goods' statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Yangzhou Jinquan Travelling Goods' statutory profits are better than its underlying earnings power. Nonetheless, it's still worth noting that its earnings per share have grown at 18% over the last three years. 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. If you want to do dive deeper into Yangzhou Jinquan Travelling Goods, you'd also look into what risks it is currently facing. For example, we've discovered 2 warning signs that you should run your eye over to get a better picture of Yangzhou Jinquan Travelling Goods.

This note has only looked at a single factor that sheds light on the nature of Yangzhou Jinquan Travelling Goods' 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 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.