Shareholders appeared unconcerned with Zhejiang Daily Digital Culture Group Co.,Ltd's (SHSE:600633) lackluster earnings report last week. Our analysis suggests that while the profits are soft, the foundations of the business are strong.
How Do Unusual Items Influence Profit?
To properly understand Zhejiang Daily Digital Culture GroupLtd's profit results, we need to consider the CN¥230m expense attributed to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect Zhejiang Daily Digital Culture GroupLtd to produce a higher profit next year, all else being equal.
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 Daily Digital Culture GroupLtd's Profit Performance
Unusual items (expenses) detracted from Zhejiang Daily Digital Culture GroupLtd's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Zhejiang Daily Digital Culture GroupLtd's statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in the last twelve months. 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. So while earnings quality is important, it's equally important to consider the risks facing Zhejiang Daily Digital Culture GroupLtd at this point in time. For example, we've discovered 3 warning signs that you should run your eye over to get a better picture of Zhejiang Daily Digital Culture GroupLtd.
Today we've zoomed in on a single data point to better understand the nature of Zhejiang Daily Digital Culture GroupLtd'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.
