There May Be Some Bright Spots In Guangdong Guangzhou Daily Media's (SZSE:002181) Earnings

Shareholders appeared unconcerned with Guangdong Guangzhou Daily Media Co., Ltd.'s (SZSE:002181) lackluster earnings report last week. We did some digging, and we believe the earnings are stronger than they seem.

View our latest analysis for Guangdong Guangzhou Daily Media

The Impact Of Unusual Items On Profit

For anyone who wants to understand Guangdong Guangzhou Daily Media's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥22m 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. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect Guangdong Guangzhou Daily Media to produce a higher profit next year, all else being equal.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Guangdong Guangzhou Daily Media.

Our Take On Guangdong Guangzhou Daily Media's Profit Performance

Because unusual items detracted from Guangdong Guangzhou Daily Media's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Guangdong Guangzhou Daily Media'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. Be aware that Guangdong Guangzhou Daily Media is showing 4 warning signs in our investment analysis and 2 of those shouldn't be ignored...

This note has only looked at a single factor that sheds light on the nature of Guangdong Guangzhou Daily Media'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.