The Strong Earnings Posted By ZOY Home FurnishingLtd (SHSE:603709) Are A Good Indication Of The Strength Of The Business

ZOY Home Furnishing Co.,Ltd's (SHSE:603709) strong earnings report was rewarded with a positive stock price move. We did some digging and found some further encouraging factors that investors will like.

See our latest analysis for ZOY Home FurnishingLtd

The Impact Of Unusual Items On Profit

Importantly, our data indicates that ZOY Home FurnishingLtd's profit was reduced by CN¥5.2m, 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. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. 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 ZOY Home FurnishingLtd 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 ZOY Home FurnishingLtd.

Our Take On ZOY Home FurnishingLtd's Profit Performance

Because unusual items detracted from ZOY Home FurnishingLtd'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 ZOY Home FurnishingLtd'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. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For instance, we've identified 2 warning signs for ZOY Home FurnishingLtd (1 is significant) you should be familiar with.

Today we've zoomed in on a single data point to better understand the nature of ZOY Home FurnishingLtd'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. 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 that insiders are buying 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.