Maoye Commercial's (SHSE:600828) Soft Earnings Are Actually Better Than They Appear

The market was pleased with the recent earnings report from Maoye Commercial Co., Ltd. (SHSE:600828), despite the profit numbers being soft. We think that investors might be looking at some positive factors beyond the earnings numbers.

Check out our latest analysis for Maoye Commercial

How Do Unusual Items Influence Profit?

For anyone who wants to understand Maoye Commercial's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥87m 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 Maoye Commercial 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 Maoye Commercial.

Our Take On Maoye Commercial's Profit Performance

Because unusual items detracted from Maoye Commercial'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 Maoye Commercial's statutory profit actually understates its earnings potential! Unfortunately, though, its earnings per share actually fell back over the last year. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example, we've found that Maoye Commercial has 5 warning signs (2 are concerning!) that deserve your attention before going any further with your analysis.

Today we've zoomed in on a single data point to better understand the nature of Maoye Commercial'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. 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 with significant insider holdings 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.