Shenzhen Pagoda Industrial (Group)'s (HKG:2411) Weak Earnings May Only Reveal A Part Of The Whole Picture

Despite Shenzhen Pagoda Industrial (Group) Corporation Limited's (HKG:2411) recent earnings report having lackluster headline numbers, the market responded positively. We think that shareholders might be missing some concerning factors that our analysis found.

See our latest analysis for Shenzhen Pagoda Industrial (Group)

How Do Unusual Items Influence Profit?

For anyone who wants to understand Shenzhen Pagoda Industrial (Group)'s profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥20m 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 crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And that's as you'd expect, given these boosts are described as 'unusual'. If Shenzhen Pagoda Industrial (Group) doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On Shenzhen Pagoda Industrial (Group)'s Profit Performance

Arguably, Shenzhen Pagoda Industrial (Group)'s statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Shenzhen Pagoda Industrial (Group)'s statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 32% per annum growth in EPS for the last three. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Case in point: We've spotted 1 warning sign for Shenzhen Pagoda Industrial (Group) you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Shenzhen Pagoda Industrial (Group)'s profit. But there is always more to discover if you are capable of focussing your mind on minutiae. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. 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.