There May Be Underlying Issues With The Quality Of Xinjiang Winka Times Department StoreLtd's (SHSE:603101) Earnings

Xinjiang Winka Times Department Store Co.,Ltd.'s (SHSE:603101) robust earnings report didn't manage to move the market for its stock. Our analysis suggests that shareholders have noticed something concerning in the numbers.

Check out our latest analysis for Xinjiang Winka Times Department StoreLtd

How Do Unusual Items Influence Profit?

To properly understand Xinjiang Winka Times Department StoreLtd's profit results, we need to consider the CN¥18m gain attributed to unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Xinjiang Winka Times Department StoreLtd.

Our Take On Xinjiang Winka Times Department StoreLtd's Profit Performance

We'd posit that Xinjiang Winka Times Department StoreLtd's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that Xinjiang Winka Times Department StoreLtd's statutory profits are better than its underlying earnings power. On the bright side, the company showed enough improvement to book a profit this year, after losing money 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example, Xinjiang Winka Times Department StoreLtd has 3 warning signs (and 2 which are significant) we think you should know about.

This note has only looked at a single factor that sheds light on the nature of Xinjiang Winka Times Department StoreLtd's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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. 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.