Liaoning He Eye Hospital Group's (SZSE:301103) Anemic Earnings Might Be Worse Than You Think

Investors were disappointed by Liaoning He Eye Hospital Group Co., LTD.'s (SZSE:301103 ) latest earnings release. We did some further digging and think they have a few more reasons to be concerned beyond the statutory profit.

View our latest analysis for Liaoning He Eye Hospital Group

How Do Unusual Items Influence Profit?

For anyone who wants to understand Liaoning He Eye Hospital Group's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥6.6m worth of unusual items. 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. Which is hardly surprising, given the name. Liaoning He Eye Hospital Group had a rather significant contribution from unusual items relative to its profit to June 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 Liaoning He Eye Hospital Group.

Our Take On Liaoning He Eye Hospital Group's Profit Performance

As we discussed above, we think the significant positive unusual item makes Liaoning He Eye Hospital Group's earnings a poor guide to its underlying profitability. For this reason, we think that Liaoning He Eye Hospital Group's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. In further bad news, its earnings per share decreased in the last year. 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. So while earnings quality is important, it's equally important to consider the risks facing Liaoning He Eye Hospital Group at this point in time. For example, we've found that Liaoning He Eye Hospital Group has 3 warning signs (2 shouldn't be ignored!) that deserve your attention before going any further with your analysis.

This note has only looked at a single factor that sheds light on the nature of Liaoning He Eye Hospital Group'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. 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.