Guangzhou Zhujiang Brewery (SZSE:002461) Strong Profits May Be Masking Some Underlying Issues

The recent earnings posted by Guangzhou Zhujiang Brewery Co., Ltd (SZSE:002461) were solid, but the stock didn't move as much as we expected. We believe that shareholders have noticed some concerning factors beyond the statutory profit numbers.

See our latest analysis for Guangzhou Zhujiang Brewery

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Guangzhou Zhujiang Brewery's profit received a boost of CN¥80m in unusual items, over the last year. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. If Guangzhou Zhujiang Brewery 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 Zhujiang Brewery's Profit Performance

Arguably, Guangzhou Zhujiang Brewery's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Guangzhou Zhujiang Brewery's statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 7.7% per annum growth in EPS for the last three. 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Every company has risks, and we've spotted 1 warning sign for Guangzhou Zhujiang Brewery you should know about.

Today we've zoomed in on a single data point to better understand the nature of Guangzhou Zhujiang Brewery'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.