There May Be Reason For Hope In Minsheng Education Group's (HKG:1569) Disappointing Earnings

Investors were disappointed with the weak earnings posted by Minsheng Education Group Company Limited (HKG:1569 ). While the headline numbers were soft, we believe that investors might be missing some encouraging factors.

Check out our latest analysis for Minsheng Education Group

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Minsheng Education Group's profit was reduced by CN¥164m, 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. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. If Minsheng Education Group doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

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

Our Take On Minsheng Education Group's Profit Performance

Unusual items (expenses) detracted from Minsheng Education Group's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Minsheng Education Group's statutory profit actually understates its earnings potential! And we are pleased to note that EPS is at least heading in the right direction over the last three years. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example, we've discovered 3 warning signs that you should run your eye over to get a better picture of Minsheng Education Group.

This note has only looked at a single factor that sheds light on the nature of Minsheng Education 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 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.