The market seemed underwhelmed by last week's earnings announcement from Suxin Joyful Life Services Co., Ltd. (HKG:2152) despite the healthy numbers. We did some analysis to find out why and believe that investors might be missing some encouraging factors contained in the earnings.
See our latest analysis for Suxin Joyful Life Services
The Impact Of Unusual Items On Profit
Importantly, our data indicates that Suxin Joyful Life Services' profit was reduced by CN¥20m, 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 Suxin Joyful Life Services 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 Suxin Joyful Life Services.
Our Take On Suxin Joyful Life Services' Profit Performance
Because unusual items detracted from Suxin Joyful Life Services' earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Suxin Joyful Life Services' earnings potential is at least as good as it seems, and maybe even better! And it's also good to see that its earnings per share have improved a bit over the last three years. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Case in point: We've spotted 2 warning signs for Suxin Joyful Life Services you should be aware of.
This note has only looked at a single factor that sheds light on the nature of Suxin Joyful Life Services' 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. 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.