The market seemed underwhelmed by last week's earnings announcement from Fujian Zhangzhou Development Co.,LTD. (SZSE:000753) despite the healthy numbers. We did some digging, and we think that investors are missing some encouraging factors in the underlying numbers.
The Impact Of Unusual Items On Profit
To properly understand Fujian Zhangzhou DevelopmentLTD's profit results, we need to consider the CN¥187m expense attributed to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. Fujian Zhangzhou DevelopmentLTD took a rather significant hit from unusual items in the year to December 2023. As a result, we can surmise that the unusual items made its statutory profit significantly weaker than it would otherwise be.
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Fujian Zhangzhou DevelopmentLTD.
Our Take On Fujian Zhangzhou DevelopmentLTD's Profit Performance
As we mentioned previously, the Fujian Zhangzhou DevelopmentLTD's profit was hampered by unusual items in the last year. Because of this, we think Fujian Zhangzhou DevelopmentLTD's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. If you want to do dive deeper into Fujian Zhangzhou DevelopmentLTD, you'd also look into what risks it is currently facing. Case in point: We've spotted 3 warning signs for Fujian Zhangzhou DevelopmentLTD you should be mindful of and 2 of these are significant.
Today we've zoomed in on a single data point to better understand the nature of Fujian Zhangzhou DevelopmentLTD's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.
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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.