Last week's earnings announcement from Sichuan Newsnet Media (Group) Co.,Ltd. (SZSE:300987) was disappointing to investors, with a sluggish profit figure. We did some further digging and think they have a few more reasons to be concerned beyond the statutory profit.

The Impact Of Unusual Items On Profit

For anyone who wants to understand Sichuan Newsnet Media (Group)Ltd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥4.7m worth of unusual items. 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'. Sichuan Newsnet Media (Group)Ltd had a rather significant contribution from unusual items relative to its profit to September 2024. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Sichuan Newsnet Media (Group)Ltd.

Our Take On Sichuan Newsnet Media (Group)Ltd's Profit Performance

As we discussed above, we think the significant positive unusual item makes Sichuan Newsnet Media (Group)Ltd's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Sichuan Newsnet Media (Group)Ltd's underlying earnings power is lower than its statutory profit. In further bad news, its earnings per share decreased in the last year. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For instance, we've identified 5 warning signs for Sichuan Newsnet Media (Group)Ltd (2 are significant) you should be familiar with.

This note has only looked at a single factor that sheds light on the nature of Sichuan Newsnet Media (Group)Ltd'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.