South China Vocational Education Group's (HKG:6913) Sluggish Earnings Might Be Just The Beginning Of Its Problems

South China Vocational Education Group Company Limited's (HKG:6913) stock rose after its recent weak earnings report. We think that shareholders might be missing some concerning factors that our analysis found.

View our latest analysis for South China Vocational Education Group

How Do Unusual Items Influence Profit?

Importantly, our data indicates that South China Vocational Education Group's profit received a boost of CN¥12m in unusual items, over the last year. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And that's as you'd expect, given these boosts are described as 'unusual'. If South China Vocational Education Group 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 South China Vocational Education Group.

Our Take On South China Vocational Education Group's Profit Performance

Arguably, South China Vocational Education Group's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that South China Vocational Education Group's statutory profits are better than its underlying earnings power. Sadly, its EPS was down over the last twelve months. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. In terms of investment risks, we've identified 2 warning signs with South China Vocational Education Group, and understanding them should be part of your investment process.

Today we've zoomed in on a single data point to better understand the nature of South China Vocational Education Group's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.