We Think That There Are More Issues For Sinotrans (HKG:598) Than Just Sluggish Earnings

The market wasn't impressed with the soft earnings from Sinotrans Limited (HKG:598) recently. We did some analysis, and found that there are some reasons to be cautious about the headline numbers.

Our free stock report includes 2 warning signs investors should be aware of before investing in Sinotrans. Read for free now.

The Impact Of Unusual Items On Profit

For anyone who wants to understand Sinotrans' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥825m worth of unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. 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. We can see that Sinotrans' positive unusual items were quite significant relative to its profit in the year to March 2025. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

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 Sinotrans' Profit Performance

As we discussed above, we think the significant positive unusual item makes Sinotrans' earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Sinotrans' underlying earnings power is lower than its statutory profit. Sadly, its EPS was down over the last twelve months. 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. For example - Sinotrans has 2 warning signs we think you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Sinotrans' profit. But there are plenty of other ways to inform your opinion of a company. 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.