Shandong Zhonglu Oceanic Fisheries' (SZSE:200992) Strong Earnings Are Of Good Quality

Even though Shandong Zhonglu Oceanic Fisheries Company Limited's (SZSE:200992) recent earnings release was robust, the market didn't seem to notice. We think that investors have missed some encouraging factors underlying the profit figures.

Check out our latest analysis for Shandong Zhonglu Oceanic Fisheries

How Do Unusual Items Influence Profit?

To properly understand Shandong Zhonglu Oceanic Fisheries' profit results, we need to consider the CN¥68m expense attributed to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. In the twelve months to March 2024, Shandong Zhonglu Oceanic Fisheries had a big unusual items expense. As a result, we can surmise that the unusual items made its statutory profit significantly weaker 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 Shandong Zhonglu Oceanic Fisheries.

Our Take On Shandong Zhonglu Oceanic Fisheries' Profit Performance

As we discussed above, we think the significant unusual expense will make Shandong Zhonglu Oceanic Fisheries' statutory profit lower than it would otherwise have been. Based on this observation, we consider it possible that Shandong Zhonglu Oceanic Fisheries' statutory profit actually understates its earnings potential! Better yet, its EPS are growing strongly, which is nice to see. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. To that end, you should learn about the 3 warning signs we've spotted with Shandong Zhonglu Oceanic Fisheries (including 1 which doesn't sit too well with us).

This note has only looked at a single factor that sheds light on the nature of Shandong Zhonglu Oceanic Fisheries' profit. But there are plenty of other ways to inform your opinion of a company. 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. 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 that insiders are buying 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.