Earnings Troubles May Signal Larger Issues for Shenzhen Best of Best HoldingsLtd (SZSE:001298) Shareholders

Last week's earnings announcement from Shenzhen Best of Best Holdings Co.,Ltd. (SZSE:001298) was disappointing to investors, with a sluggish profit figure. We did some further digging and think they have a few more reasons to be concerned beyond the statutory profit.

View our latest analysis for Shenzhen Best of Best HoldingsLtd

The Impact Of Unusual Items On Profit

For anyone who wants to understand Shenzhen Best of Best HoldingsLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥22m worth of unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. 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. We can see that Shenzhen Best of Best HoldingsLtd's positive unusual items were quite significant relative to its profit in the year to September 2024. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Shenzhen Best of Best HoldingsLtd.

Our Take On Shenzhen Best of Best HoldingsLtd's Profit Performance

As we discussed above, we think the significant positive unusual item makes Shenzhen Best of Best HoldingsLtd's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Shenzhen Best of Best HoldingsLtd's underlying earnings power is lower than its statutory profit. In further bad news, its earnings per share decreased in the last year. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Be aware that Shenzhen Best of Best HoldingsLtd is showing 4 warning signs in our investment analysis and 2 of those shouldn't be ignored...

Today we've zoomed in on a single data point to better understand the nature of Shenzhen Best of Best HoldingsLtd's profit. But there are plenty of other ways to inform your opinion of a company. 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.