Zhongmin Baihui Retail Group's (SGX:5SR) Promising Earnings May Rest On Soft Foundations

Unsurprisingly, Zhongmin Baihui Retail Group Ltd.'s (SGX:5SR) stock price was strong on the back of its healthy earnings report. However, we think that shareholders may be missing some concerning details in the numbers.

See our latest analysis for Zhongmin Baihui Retail Group

How Do Unusual Items Influence Profit?

To properly understand Zhongmin Baihui Retail Group's profit results, we need to consider the CN¥5.4m gain attributed to unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

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

Our Take On Zhongmin Baihui Retail Group's Profit Performance

Arguably, Zhongmin Baihui Retail Group's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Zhongmin Baihui Retail Group's statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 12% EPS growth in the last year. 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. If you want to do dive deeper into Zhongmin Baihui Retail Group, you'd also look into what risks it is currently facing. Our analysis shows 5 warning signs for Zhongmin Baihui Retail Group (3 are a bit concerning!) and we strongly recommend you look at these before investing.

Today we've zoomed in on a single data point to better understand the nature of Zhongmin Baihui Retail Group's 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.