We Think That There Are Some Issues For Shenzhen China Bicycle Company (Holdings) (SZSE:000017) Beyond Its Promising Earnings

The recent earnings posted by Shenzhen China Bicycle Company (Holdings) Limited (SZSE:000017) were solid, but the stock didn't move as much as we expected. 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 Shenzhen China Bicycle Company (Holdings)

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Shenzhen China Bicycle Company (Holdings)'s profit received a boost of CN¥5.9m 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 analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's as you'd expect, given these boosts are described as 'unusual'. We can see that Shenzhen China Bicycle Company (Holdings)'s positive unusual items were quite significant relative to its profit in the year to March 2024. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Shenzhen China Bicycle Company (Holdings).

Our Take On Shenzhen China Bicycle Company (Holdings)'s Profit Performance

As we discussed above, we think the significant positive unusual item makes Shenzhen China Bicycle Company (Holdings)'s earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Shenzhen China Bicycle Company (Holdings)'s underlying earnings power is lower than its statutory profit. On the bright side, 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example, we've discovered 2 warning signs that you should run your eye over to get a better picture of Shenzhen China Bicycle Company (Holdings).

This note has only looked at a single factor that sheds light on the nature of Shenzhen China Bicycle Company (Holdings)'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 that insiders are buying.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.