There May Be Some Bright Spots In HL Corp (Shenzhen)'s (SZSE:002105) Earnings

Shareholders appeared unconcerned with HL Corp (Shenzhen)'s (SZSE:002105) lackluster earnings report last week. Our analysis suggests that while the profits are soft, the foundations of the business are strong.

Check out our latest analysis for HL Corp (Shenzhen)

The Impact Of Unusual Items On Profit

To properly understand HL Corp (Shenzhen)'s profit results, we need to consider the CN¥6.5m expense attributed 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. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. In the twelve months to March 2024, HL Corp (Shenzhen) had a big unusual items expense. As a result, we can surmise that the unusual items made its statutory profit significantly weaker 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 HL Corp (Shenzhen).

Our Take On HL Corp (Shenzhen)'s Profit Performance

As we discussed above, we think the significant unusual expense will make HL Corp (Shenzhen)'s statutory profit lower than it would otherwise have been. Because of this, we think HL Corp (Shenzhen)'s underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! Unfortunately, though, its earnings per share actually fell back over the 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. While conducting our analysis, we found that HL Corp (Shenzhen) has 3 warning signs and it would be unwise to ignore them.

This note has only looked at a single factor that sheds light on the nature of HL Corp (Shenzhen)'s profit. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. 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.