Even though Fujian SBS Zipper Science&Technology Co., Ltd's (SZSE:002098) recent earnings release was robust, the market didn't seem to notice. We think that investors have missed some encouraging factors underlying the profit figures.
How Do Unusual Items Influence Profit?
To properly understand Fujian SBS Zipper Science&Technology's profit results, we need to consider the CN¥33m expense attributed 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. 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 Fujian SBS Zipper Science&Technology 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 Fujian SBS Zipper Science&Technology.
Our Take On Fujian SBS Zipper Science&Technology's Profit Performance
Unusual items (expenses) detracted from Fujian SBS Zipper Science&Technology's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Fujian SBS Zipper Science&Technology's statutory profit actually understates its earnings potential! Furthermore, it has done a great job growing EPS over the last year. 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. Just as investors must consider earnings, it is also important to take into account the strength of a company's balance sheet. We've done some analysis and you can see our take on Fujian SBS Zipper Science&Technology's balance sheet by clicking here.
This note has only looked at a single factor that sheds light on the nature of Fujian SBS Zipper Science&Technology'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. 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 that insiders are buying 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.