We Think That There Are Issues Underlying Shanghai Jinjiang International Travel's (SHSE:900929) Earnings

Despite posting some strong earnings, the market for Shanghai Jinjiang International Travel Co., Ltd.'s (SHSE:900929) stock hasn't moved much. We did some digging, and we found some concerning factors in the details.

Check out our latest analysis for Shanghai Jinjiang International Travel

How Do Unusual Items Influence Profit?

For anyone who wants to understand Shanghai Jinjiang International Travel's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥3.9m worth of unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. 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, after all, that's exactly what the accounting terminology implies. Shanghai Jinjiang International Travel had a rather significant contribution from unusual items relative to its profit to December 2023. 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 Shanghai Jinjiang International Travel.

Our Take On Shanghai Jinjiang International Travel's Profit Performance

As previously mentioned, Shanghai Jinjiang International Travel's large boost from unusual items won't be there indefinitely, so its statutory earnings are probably a poor guide to its underlying profitability. As a result, we think it may well be the case that Shanghai Jinjiang International Travel'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. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. If you want to do dive deeper into Shanghai Jinjiang International Travel, you'd also look into what risks it is currently facing. Be aware that Shanghai Jinjiang International Travel is showing 2 warning signs in our investment analysis and 1 of those is a bit unpleasant...

Today we've zoomed in on a single data point to better understand the nature of Shanghai Jinjiang International Travel'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.

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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.