The Strong Earnings Posted By Sichuan Fulin Transportation Group (SZSE:002357) Are A Good Indication Of The Strength Of The Business

Sichuan Fulin Transportation Group Co., Ltd. (SZSE:002357) just reported healthy earnings but the stock price didn't move much. We think that investors have missed some encouraging factors underlying the profit figures.

Check out our latest analysis for Sichuan Fulin Transportation Group

The Impact Of Unusual Items On Profit

To properly understand Sichuan Fulin Transportation Group's profit results, we need to consider the CN¥30m expense attributed to unusual items. 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. In the twelve months to March 2024, Sichuan Fulin Transportation Group had a big unusual items expense. All else being equal, this would likely have the effect of making the statutory profit look worse than its underlying earnings power.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Sichuan Fulin Transportation Group.

Our Take On Sichuan Fulin Transportation Group's Profit Performance

As we discussed above, we think the significant unusual expense will make Sichuan Fulin Transportation Group's statutory profit lower than it would otherwise have been. Based on this observation, we consider it possible that Sichuan Fulin Transportation Group's statutory profit actually understates its earnings potential! Furthermore, it has done a great job growing EPS 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. Just as investors must consider earnings, it is also important to take into account the strength of a company's balance sheet. If you're interested we have a graphic representation of Sichuan Fulin Transportation Group's balance sheet.

This note has only looked at a single factor that sheds light on the nature of Sichuan Fulin Transportation Group'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 that insiders are buying.

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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.