We Think Beijing Sanfo Outdoor Products' (SZSE:002780) Robust Earnings Are Conservative

Beijing Sanfo Outdoor Products Co., Ltd (SZSE:002780) just reported healthy earnings but the stock price didn't move much. Our analysis suggests that investors might be missing some promising details.

View our latest analysis for Beijing Sanfo Outdoor Products

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Beijing Sanfo Outdoor Products' profit was reduced by CN¥9.4m, due to unusual items, over the last year. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. 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. If Beijing Sanfo Outdoor Products doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Beijing Sanfo Outdoor Products.

Our Take On Beijing Sanfo Outdoor Products' Profit Performance

Because unusual items detracted from Beijing Sanfo Outdoor Products' 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 Beijing Sanfo Outdoor Products' statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at an extremely impressive rate over the last year. 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. You'd be interested to know, that we found 1 warning sign for Beijing Sanfo Outdoor Products and you'll want to know about it.

This note has only looked at a single factor that sheds light on the nature of Beijing Sanfo Outdoor Products' 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. 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.