Investors Can Find Comfort In Shenzhen Best of Best HoldingsLtd's (SZSE:001298) Earnings Quality

The market was pleased with the recent earnings report from Shenzhen Best of Best Holdings Co.,Ltd. (SZSE:001298), despite the profit numbers being soft. Our analysis suggests that investors may have noticed some promising signs beyond the statutory profit figures.

See our latest analysis for Shenzhen Best of Best HoldingsLtd

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Shenzhen Best of Best HoldingsLtd's profit was reduced by CN¥20m, 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. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Shenzhen Best of Best HoldingsLtd to produce a higher profit next year, all else being equal.

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

Unusual items (expenses) detracted from Shenzhen Best of Best HoldingsLtd's earnings over the last year, but we might see an improvement next year. Because of this, we think Shenzhen Best of Best HoldingsLtd's earnings potential is at least as good as it seems, and maybe even better! Unfortunately, though, its earnings per share actually fell back 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. Every company has risks, and we've spotted 4 warning signs for Shenzhen Best of Best HoldingsLtd (of which 1 is concerning!) you should know about.

This note has only looked at a single factor that sheds light on 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. 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 that insiders are buying 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.