China Tianbao Group Development's (HKG:1427) Shareholders Have More To Worry About Than Only Soft Earnings

China Tianbao Group Development Company Limited's (HKG:1427) recent weak earnings report didn't cause a big stock movement. However, we believe that investors should be aware of some underlying factors which may be of concern.

Check out our latest analysis for China Tianbao Group Development

How Do Unusual Items Influence Profit?

For anyone who wants to understand China Tianbao Group Development's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥41m 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. Which is hardly surprising, given the name. If China Tianbao Group Development doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of China Tianbao Group Development.

Our Take On China Tianbao Group Development's Profit Performance

Arguably, China Tianbao Group Development's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that China Tianbao Group Development's true underlying earnings power is actually less 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. When we did our research, we found 2 warning signs for China Tianbao Group Development (1 is concerning!) that we believe deserve your full attention.

Today we've zoomed in on a single data point to better understand the nature of China Tianbao Group Development'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.
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