There May Be Underlying Issues With The Quality Of Shanghai Zhangjiang Hi-Tech Park Development's (SHSE:600895) Earnings

Despite posting some strong earnings, the market for Shanghai Zhangjiang Hi-Tech Park Development Co., Ltd.'s (SHSE:600895) stock hasn't moved much. Our analysis suggests that shareholders have noticed something concerning in the numbers.

Check out our latest analysis for Shanghai Zhangjiang Hi-Tech Park Development

The Impact Of Unusual Items On Profit

For anyone who wants to understand Shanghai Zhangjiang Hi-Tech Park Development's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥623m 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 analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. Which is hardly surprising, given the name. Shanghai Zhangjiang Hi-Tech Park Development had a rather significant contribution from unusual items relative to its profit to December 2023. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

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 Shanghai Zhangjiang Hi-Tech Park Development's Profit Performance

As previously mentioned, Shanghai Zhangjiang Hi-Tech Park Development's large boost from unusual items won't be there indefinitely, so its statutory earnings are probably a poor guide to its underlying profitability. For this reason, we think that Shanghai Zhangjiang Hi-Tech Park Development's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. The good news is that, its earnings per share increased by 15% in the last year. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For instance, we've identified 3 warning signs for Shanghai Zhangjiang Hi-Tech Park Development (1 doesn't sit too well with us) you should be familiar with.

This note has only looked at a single factor that sheds light on the nature of Shanghai Zhangjiang Hi-Tech Park Development's 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.

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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.