Shiyue Daotian Group's (HKG:9676) Solid Earnings Are Supported By Other Strong Factors

Shiyue Daotian Group Co., Ltd. (HKG:9676) recently posted some strong earnings, and the market responded positively. We have done some analysis, and we found several positive factors beyond the profit numbers.

View our latest analysis for Shiyue Daotian Group

The Impact Of Unusual Items On Profit

To properly understand Shiyue Daotian Group's profit results, we need to consider the CN¥22m 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. If Shiyue Daotian 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 Shiyue Daotian Group.

Our Take On Shiyue Daotian Group's Profit Performance

Because unusual items detracted from Shiyue Daotian Group's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Shiyue Daotian Group's statutory profit actually understates its earnings potential! And it's also positive that the company showed enough improvement to book a profit this year, after losing money 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. Just as investors must consider earnings, it is also important to take into account the strength of a company's balance sheet. You can see our latest analysis on Shiyue Daotian Group's balance sheet health here.

Today we've zoomed in on a single data point to better understand the nature of Shiyue Daotian 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. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks with significant insider holdings to be useful.

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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.