The market wasn't impressed with the soft earnings from Zhejiang Huace Film & TV Co., Ltd. (SZSE:300133) recently. We did some analysis, and found that there are some reasons to be cautious about the headline numbers.
The Impact Of Unusual Items On Profit
To properly understand Zhejiang Huace Film & TV's profit results, we need to consider the CN¥71m gain attributed to 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. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. We can see that Zhejiang Huace Film & TV's positive unusual items were quite significant relative to its profit in the year to June 2024. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.
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 Zhejiang Huace Film & TV's Profit Performance
As previously mentioned, Zhejiang Huace Film & TV's large boost from unusual items won't be there indefinitely, so its statutory earnings are probably a poor guide to its underlying profitability. For this reason, we think that Zhejiang Huace Film & TV's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. 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. If you want to do dive deeper into Zhejiang Huace Film & TV, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 3 warning signs for Zhejiang Huace Film & TV and you'll want to know about them.
Today we've zoomed in on a single data point to better understand the nature of Zhejiang Huace Film & TV'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.
