ZOY Home Furnishing Co.,Ltd (SHSE:603709) recently posted some strong earnings, and the market responded positively. We did some digging and found some further encouraging factors that investors will like.
The Impact Of Unusual Items On Profit
Importantly, our data indicates that ZOY Home FurnishingLtd's profit was reduced by CN¥5.2m, due to unusual items, over the last year. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. 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. Assuming those unusual expenses don't come up again, we'd therefore expect ZOY Home FurnishingLtd to produce a higher profit next year, all else being equal.
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of ZOY Home FurnishingLtd.
Our Take On ZOY Home FurnishingLtd's Profit Performance
Because unusual items detracted from ZOY Home FurnishingLtd's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think ZOY Home FurnishingLtd's earnings potential is at least as good as it seems, and maybe even better! And it's also positive that the company showed enough improvement to book a profit this year, after losing money last year. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. When we did our research, we found 2 warning signs for ZOY Home FurnishingLtd (1 makes us a bit uncomfortable!) that we believe deserve your full attention.
This note has only looked at a single factor that sheds light on the nature of ZOY Home FurnishingLtd'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. 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 that insiders are buying to be useful.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
