We Like Fujian Zhangzhou DevelopmentLTD's (SZSE:000753) Earnings For More Than Just Statutory Profit

Investors signalled that they were pleased with Fujian Zhangzhou Development Co.,LTD.'s (SZSE:000753) most recent earnings report. According to our analysis of the report, the strong headline profit numbers are supported by strong earnings fundamentals.

View our latest analysis for Fujian Zhangzhou DevelopmentLTD

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Fujian Zhangzhou DevelopmentLTD's profit was reduced by CN¥34m, due to unusual items, over the last year. 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, after all, that's exactly what the accounting terminology implies. Fujian Zhangzhou DevelopmentLTD took a rather significant hit from unusual items in the year to March 2024. All else being equal, this would likely have the effect of making the statutory profit look worse than its underlying earnings power.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Fujian Zhangzhou DevelopmentLTD.

Our Take On Fujian Zhangzhou DevelopmentLTD's Profit Performance

As we discussed above, we think the significant unusual expense will make Fujian Zhangzhou DevelopmentLTD's statutory profit lower than it would otherwise have been. Based on this observation, we consider it possible that Fujian Zhangzhou DevelopmentLTD's statutory profit actually understates its earnings potential! And the EPS is up 35% over the last twelve months. 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. If you'd like to know more about Fujian Zhangzhou DevelopmentLTD as a business, it's important to be aware of any risks it's facing. When we did our research, we found 3 warning signs for Fujian Zhangzhou DevelopmentLTD (2 are a bit unpleasant!) that we believe deserve your full attention.

This note has only looked at a single factor that sheds light on the nature of Fujian Zhangzhou DevelopmentLTD'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 that insiders are buying.

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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.