Zhejiang Guyuelongshan Shaoxing WineLtd's (SHSE:600059) Earnings Are Of Questionable Quality

Zhejiang Guyuelongshan Shaoxing Wine Co.,Ltd (SHSE:600059) announced strong profits, but the stock was stagnant. Our analysis suggests that shareholders have noticed something concerning in the numbers.

See our latest analysis for Zhejiang Guyuelongshan Shaoxing WineLtd

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Zhejiang Guyuelongshan Shaoxing WineLtd's profit received a boost of CN¥256m in unusual items, over the last year. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. 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 December 2023. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

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 previously mentioned, Zhejiang Guyuelongshan Shaoxing WineLtd'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 Zhejiang Guyuelongshan Shaoxing WineLtd's underlying earnings power is lower than its statutory profit. But on the bright side, its earnings per share have grown at an extremely impressive rate over the last three years. 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 Zhejiang Guyuelongshan Shaoxing WineLtd as a business, it's important to be aware of any risks it's facing. Be aware that Zhejiang Guyuelongshan Shaoxing WineLtd is showing 3 warning signs in our investment analysis and 1 of those is a bit concerning...

Today we've zoomed in on a single data point to better understand the nature of Zhejiang Guyuelongshan Shaoxing WineLtd'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.