Guangzhou Restaurant Group's (SHSE:603043) Problems Go Beyond Weak Profit

Guangzhou Restaurant Group Company Limited's (SHSE:603043) recent weak earnings report didn't cause a big stock movement. However, we believe that investors should be aware of some underlying factors which may be of concern.

View our latest analysis for Guangzhou Restaurant Group

How Do Unusual Items Influence Profit?

For anyone who wants to understand Guangzhou Restaurant Group's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥47m 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. If Guangzhou Restaurant Group doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

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 Guangzhou Restaurant Group's Profit Performance

We'd posit that Guangzhou Restaurant Group's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that Guangzhou Restaurant Group's statutory profits are better than its underlying earnings power. Sadly, its EPS was down over the last twelve months. 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. If you want to do dive deeper into Guangzhou Restaurant Group, you'd also look into what risks it is currently facing. In terms of investment risks, we've identified 1 warning sign with Guangzhou Restaurant Group, and understanding it should be part of your investment process.

Today we've zoomed in on a single data point to better understand the nature of Guangzhou Restaurant Group's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.