Shanghai Yuyuan Tourist Mart (Group) Co., Ltd.'s (SHSE:600655) recent weak earnings report didn't cause a big stock movement. However, we believe that investors should be aware of some underlying factors which may be of concern.
The Impact Of Unusual Items On Profit
Importantly, our data indicates that Shanghai Yuyuan Tourist Mart (Group)'s profit received a boost of CN¥378m in unusual items, over the last year. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. Which is hardly surprising, given the name. Shanghai Yuyuan Tourist Mart (Group) had a rather significant contribution from unusual items relative to its profit to September 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 Shanghai Yuyuan Tourist Mart (Group)'s Profit Performance
As we discussed above, we think the significant positive unusual item makes Shanghai Yuyuan Tourist Mart (Group)'s earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Shanghai Yuyuan Tourist Mart (Group)'s underlying earnings power is lower than its statutory profit. Sadly, its EPS was down over 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. To that end, you should learn about the 4 warning signs we've spotted with Shanghai Yuyuan Tourist Mart (Group) (including 1 which is concerning).
Today we've zoomed in on a single data point to better understand the nature of Shanghai Yuyuan Tourist Mart (Group)'s profit. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. 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.
