Investors Shouldn't Be Too Comfortable With Zhejiang Guyuelongshan Shaoxing WineLtd's (SHSE:600059) Earnings

Zhejiang Guyuelongshan Shaoxing Wine Co.,Ltd (SHSE:600059) announced strong profits, but the stock was stagnant. We did some digging, and we found some concerning factors in the details.

Check out our latest analysis for Zhejiang Guyuelongshan Shaoxing WineLtd

How Do Unusual Items Influence Profit?

For anyone who wants to understand Zhejiang Guyuelongshan Shaoxing WineLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥263m 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 that's as you'd expect, given these boosts are described as 'unusual'. Zhejiang Guyuelongshan Shaoxing WineLtd had a rather significant contribution from unusual items relative to its profit to September 2024. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

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 Zhejiang Guyuelongshan Shaoxing WineLtd's Profit Performance

As we discussed above, we think the significant positive unusual item makes Zhejiang Guyuelongshan Shaoxing WineLtd's earnings a poor guide to its underlying profitability. For this reason, we think that Zhejiang Guyuelongshan Shaoxing WineLtd's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. But the good news is that its EPS growth over the last three years has been very impressive. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. To that end, you should learn about the 3 warning signs we've spotted with Zhejiang Guyuelongshan Shaoxing WineLtd (including 1 which is concerning).

This note has only looked at a single factor that sheds light on the nature of Zhejiang Guyuelongshan Shaoxing WineLtd'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 with significant insider holdings 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.