Sichuan Joyou Digital TechnologiesLtd's (SZSE:301172) Shareholders Have More To Worry About Than Only Soft Earnings

Last week's earnings announcement from Sichuan Joyou Digital Technologies Co.,Ltd. (SZSE:301172) was disappointing to investors, with a sluggish profit figure. Our analysis has found some reasons to be concerned, beyond the weak headline numbers.

View our latest analysis for Sichuan Joyou Digital TechnologiesLtd

How Do Unusual Items Influence Profit?

For anyone who wants to understand Sichuan Joyou Digital TechnologiesLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥5.3m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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. 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 Sichuan Joyou Digital TechnologiesLtd.

Our Take On Sichuan Joyou Digital TechnologiesLtd's Profit Performance

Arguably, Sichuan Joyou Digital TechnologiesLtd's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Sichuan Joyou Digital TechnologiesLtd's statutory profits are better than its underlying earnings power. In further bad news, its earnings per share decreased in 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Every company has risks, and we've spotted 2 warning signs for Sichuan Joyou Digital TechnologiesLtd you should know about.

Today we've zoomed in on a single data point to better understand the nature of Sichuan Joyou Digital TechnologiesLtd'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.