Shareholders appeared to be happy with China 21st Century Education Group Limited's (HKG:1598) solid earnings report last week. According to our analysis of the report, the strong headline profit numbers are supported by strong earnings fundamentals.
See our latest analysis for China 21st Century Education Group
How Do Unusual Items Influence Profit?
For anyone who wants to understand China 21st Century Education Group's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥12m due to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. If China 21st Century Education Group doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of China 21st Century Education Group.
Our Take On China 21st Century Education Group's Profit Performance
Because unusual items detracted from China 21st Century Education Group'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 China 21st Century Education Group's earnings potential is at least as good as it seems, and maybe even better! And the EPS is up 9.9% over the last twelve months. 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 China 21st Century Education Group, you'd also look into what risks it is currently facing. For example, we've found that China 21st Century Education Group has 4 warning signs (2 make us uncomfortable!) that deserve your attention before going any further with your analysis.
This note has only looked at a single factor that sheds light on the nature of China 21st Century Education 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.