Earnings Troubles May Signal Larger Issues for China Yongda Automobiles Services Holdings (HKG:3669) Shareholders
China Yongda Automobiles Services Holdings Limited’s (HKG:3669) stock showed strength, with investors undeterred by its weak earnings report. While shareholders may be willing to overlook soft profit numbers, we believe that they should also be taking into account some other factors which may be cause for concern.
See our latest analysis for China Yongda Automobiles Services Holdings
How Do Unusual Items Influence Profit?
Importantly, our data indicates that China Yongda Automobiles Services Holdings’ profit received a boost of CN¥113m in unusual items, over the last year. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. Which is hardly surprising, given the name. Assuming those unusual items don’t show up again in the current year, we’d thus expect profit to be weaker next year (in the absence of business growth, that is).
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 China Yongda Automobiles Services Holdings’ Profit Performance
Arguably, China Yongda Automobiles Services Holdings’ statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that China Yongda Automobiles Services Holdings’ true underlying earnings power is actually less than its statutory profit. Sadly, its EPS was down over the last twelve months. At the end of the day, it’s essential to consider more than just the factors above, if you want to understand the company properly. If you’d like to know more about China Yongda Automobiles Services Holdings as a business, it’s important to be aware of any risks it’s facing. While conducting our analysis, we found that China Yongda Automobiles Services Holdings has 2 warning signs and it would be unwise to ignore these.
Today we’ve zoomed in on a single data point to better understand the nature of China Yongda Automobiles Services Holdings’ profit. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. 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 China Yongda Automobiles Services Holdings 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.
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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.
