The stock was sluggish on the back of MYS Group Co., Ltd.'s (SZSE:002303) recent earnings report. Along with the solid headline numbers, we think that investors have some reasons for optimism.
How Do Unusual Items Influence Profit?
To properly understand MYS Group's profit results, we need to consider the CN¥36m expense attributed to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. If MYS 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 MYS Group.
Our Take On MYS Group's Profit Performance
Unusual items (expenses) detracted from MYS Group's earnings over the last year, but we might see an improvement next year. Because of this, we think MYS Group's earnings potential is at least as good as it seems, and maybe even better! And the EPS is up 46% 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. So while earnings quality is important, it's equally important to consider the risks facing MYS Group at this point in time. Our analysis shows 2 warning signs for MYS Group (1 shouldn't be ignored!) and we strongly recommend you look at them before investing.
Today we've zoomed in on a single data point to better understand the nature of MYS Group'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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.
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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.