Why Greattown Holdings' (SHSE:600094) Earnings Are Better Than They Seem

The market seemed underwhelmed by last week's earnings announcement from Greattown Holdings Ltd. (SHSE:600094) despite the healthy numbers. We did some analysis to find out why and believe that investors might be missing some encouraging factors contained in the earnings.

Check out our latest analysis for Greattown Holdings

How Do Unusual Items Influence Profit?

For anyone who wants to understand Greattown Holdings' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥97m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. 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 Greattown Holdings 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 Greattown Holdings.

Our Take On Greattown Holdings' Profit Performance

Because unusual items detracted from Greattown Holdings' earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Greattown Holdings' earnings potential is at least as good as it seems, and maybe even better! And the EPS is up 26% over 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. If you'd like to know more about Greattown Holdings as a business, it's important to be aware of any risks it's facing. At Simply Wall St, we found 1 warning sign for Greattown Holdings and we think they deserve your attention.

This note has only looked at a single factor that sheds light on the nature of Greattown Holdings' 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 that insiders are buying to be useful.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.