Earnings Troubles May Signal Larger Issues for Zhuhai Huafa PropertiesLtd (SHSE:600325) Shareholders

A lackluster earnings announcement from Zhuhai Huafa Properties Co.,Ltd (SHSE:600325) last week didn't sink the stock price. However, we believe that investors should be aware of some underlying factors which may be of concern.

Check out our latest analysis for Zhuhai Huafa PropertiesLtd

How Do Unusual Items Influence Profit?

For anyone who wants to understand Zhuhai Huafa PropertiesLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥1.0b 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. And that's as you'd expect, given these boosts are described as 'unusual'. We can see that Zhuhai Huafa PropertiesLtd'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.

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 Zhuhai Huafa PropertiesLtd's Profit Performance

As we discussed above, we think the significant positive unusual item makes Zhuhai Huafa PropertiesLtd's earnings a poor guide to its underlying profitability. For this reason, we think that Zhuhai Huafa PropertiesLtd's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. Sadly, its EPS was down 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 want to do dive deeper into Zhuhai Huafa PropertiesLtd, you'd also look into what risks it is currently facing. To that end, you should learn about the 4 warning signs we've spotted with Zhuhai Huafa PropertiesLtd (including 2 which are a bit concerning).

This note has only looked at a single factor that sheds light on the nature of Zhuhai Huafa PropertiesLtd'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 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.