Shenzhen Huaqiang Industry's (SZSE:000062) Soft Earnings Are Actually Better Than They Appear

Shenzhen Huaqiang Industry Co., Ltd.'s (SZSE:000062) recent soft profit numbers didn't appear to worry shareholders, as the stock price showed strength. We think that investors might be looking at some positive factors beyond the earnings numbers.

See our latest analysis for Shenzhen Huaqiang Industry

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Shenzhen Huaqiang Industry's profit was reduced by CN¥104m, 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. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. If Shenzhen Huaqiang Industry 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 Shenzhen Huaqiang Industry.

Our Take On Shenzhen Huaqiang Industry's Profit Performance

Because unusual items detracted from Shenzhen Huaqiang Industry's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Shenzhen Huaqiang Industry's earnings potential is at least as good as it seems, and maybe even better! On the other hand, its EPS actually shrunk in the last twelve months. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. If you want to do dive deeper into Shenzhen Huaqiang Industry, you'd also look into what risks it is currently facing. To that end, you should learn about the 5 warning signs we've spotted with Shenzhen Huaqiang Industry (including 1 which doesn't sit too well with us).

This note has only looked at a single factor that sheds light on the nature of Shenzhen Huaqiang Industry'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 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.