Guilin Tourism (SZSE:000978) Posted Healthy Earnings But There Are Some Other Factors To Be Aware Of

Guilin Tourism Corporation Limited (SZSE:000978) announced strong profits, but the stock was stagnant. Our analysis suggests that this might be because shareholders have noticed some concerning underlying factors.

Check out our latest analysis for Guilin Tourism

How Do Unusual Items Influence Profit?

For anyone who wants to understand Guilin Tourism's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥9.1m 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. Guilin Tourism had a rather significant contribution from unusual items relative to its profit to March 2024. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger 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 Guilin Tourism.

Our Take On Guilin Tourism's Profit Performance

As we discussed above, we think the significant positive unusual item makes Guilin Tourism's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Guilin Tourism's underlying earnings power is lower than its statutory profit. The good news is that it earned a profit in the last twelve months, despite its previous loss. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. If you'd like to know more about Guilin Tourism as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 2 warning signs for Guilin Tourism you should be mindful of and 1 of them is potentially serious.

Today we've zoomed in on a single data point to better understand the nature of Guilin Tourism'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 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.