Weak Statutory Earnings May Not Tell The Whole Story For Sichuan Newsnet Media (Group)Ltd (SZSE:300987)

Last week's earnings announcement from Sichuan Newsnet Media (Group) Co.,Ltd. (SZSE:300987) was disappointing to investors, with a sluggish profit figure. Our analysis has found some reasons to be concerned, beyond the weak headline numbers.

Check out our latest analysis for Sichuan Newsnet Media (Group)Ltd

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Sichuan Newsnet Media (Group)Ltd's profit received a boost of CN¥4.7m in unusual items, over the last year. 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. And, after all, that's exactly what the accounting terminology implies. We can see that Sichuan Newsnet Media (Group)Ltd's positive unusual items were quite significant relative to its profit in the year to September 2024. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Sichuan Newsnet Media (Group)Ltd.

Our Take On Sichuan Newsnet Media (Group)Ltd's Profit Performance

As previously mentioned, Sichuan Newsnet Media (Group)Ltd's large boost from unusual items won't be there indefinitely, so its statutory earnings are probably a poor guide to its underlying profitability. As a result, we think it may well be the case that Sichuan Newsnet Media (Group)Ltd's underlying earnings power is lower than its statutory profit. In further bad news, its earnings per share decreased in the last year. 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. So while earnings quality is important, it's equally important to consider the risks facing Sichuan Newsnet Media (Group)Ltd at this point in time. To that end, you should learn about the 5 warning signs we've spotted with Sichuan Newsnet Media (Group)Ltd (including 2 which shouldn't be ignored).

This note has only looked at a single factor that sheds light on the nature of Sichuan Newsnet Media (Group)Ltd's 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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.