There May Be Reason For Hope In Zhejiang Longsheng GroupLtd's (SHSE:600352) Disappointing Earnings

Shareholders appeared unconcerned with Zhejiang Longsheng Group Co.,Ltd's (SHSE:600352) lackluster earnings report last week. We think that the softer headline numbers might be getting counterbalanced by some positive underlying factors.

View our latest analysis for Zhejiang Longsheng GroupLtd

How Do Unusual Items Influence Profit?

For anyone who wants to understand Zhejiang Longsheng GroupLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥421m due 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. 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 Zhejiang Longsheng GroupLtd doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming 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 Zhejiang Longsheng GroupLtd's Profit Performance

Unusual items (expenses) detracted from Zhejiang Longsheng GroupLtd's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Zhejiang Longsheng GroupLtd's statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in the last twelve months. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. In terms of investment risks, we've identified 1 warning sign with Zhejiang Longsheng GroupLtd, and understanding this should be part of your investment process.

Today we've zoomed in on a single data point to better understand the nature of Zhejiang Longsheng GroupLtd'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. 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.