The recent earnings posted by Shanghai Yimin Commercial Group Co., Ltd. (SHSE:600824) were solid, but the stock didn't move as much as we expected. However the statutory profit number doesn't tell the whole story, and we have found some factors which might be of concern to shareholders.
The Impact Of Unusual Items On Profit
For anyone who wants to understand Shanghai Yimin Commercial Group's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥8.9m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And that's as you'd expect, given these boosts are described as 'unusual'. We can see that Shanghai Yimin Commercial Group's positive unusual items were quite significant relative to its profit in the year 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.
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Shanghai Yimin Commercial Group.
Our Take On Shanghai Yimin Commercial Group's Profit Performance
As we discussed above, we think the significant positive unusual item makes Shanghai Yimin Commercial Group's earnings a poor guide to its underlying profitability. For this reason, we think that Shanghai Yimin Commercial Group's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. The good news is that it earned a profit in the last twelve months, despite its previous loss. 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'd like to know more about Shanghai Yimin Commercial Group as a business, it's important to be aware of any risks it's facing. For example, we've found that Shanghai Yimin Commercial Group has 2 warning signs (1 is a bit concerning!) that deserve your attention before going any further with your analysis.
Today we've zoomed in on a single data point to better understand the nature of Shanghai Yimin Commercial Group'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.
