Monday, May 27, 2024

There May Be Reason For Hope In Shandong Sito Bio-technology’s (SZSE:300583) Disappointing Earnings

Must read

Shandong Sito Bio-technology Co., Ltd.’s (SZSE:300583) recent soft profit numbers didn’t appear to worry shareholders, as the stock price showed strength. We think that investors might be looking at some positive factors beyond the earnings numbers.

View our latest analysis for Shandong Sito Bio-technology

SZSE:300583 Earnings and Revenue History May 5th 2024

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Shandong Sito Bio-technology’s profit was reduced by CN¥15m, 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 Shandong Sito Bio-technology to produce a higher profit next year, all else being equal.

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On Shandong Sito Bio-technology’s Profit Performance

Unusual items (expenses) detracted from Shandong Sito Bio-technology’s earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Shandong Sito Bio-technology’s statutory profit actually understates its earnings potential! Unfortunately, though, its earnings per share actually fell back over the last year. 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. With this in mind, we wouldn’t consider investing in a stock unless we had a thorough understanding of the risks. In terms of investment risks, we’ve identified 1 warning sign with Shandong Sito Bio-technology, and understanding it should be part of your investment process.

Today we’ve zoomed in on a single data point to better understand the nature of Shandong Sito Bio-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. 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.

Valuation is complex, but we’re helping make it simple.

Find out whether Shandong Sito Bio-technology is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Latest article