Zhongmin Baihui Retail Group Ltd.'s (SGX:5SR) stock was strong after they recently reported robust earnings. However, we think that shareholders may be missing some concerning details in the numbers.

Check out our latest analysis for Zhongmin Baihui Retail Group

The Impact Of Unusual Items On Profit

To properly understand Zhongmin Baihui Retail Group's profit results, we need to consider the CN¥5.4m gain attributed to unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And, after all, that's exactly what the accounting terminology implies. 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).

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Zhongmin Baihui Retail Group.

Our Take On Zhongmin Baihui Retail Group's Profit Performance

Arguably, Zhongmin Baihui Retail Group's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Zhongmin Baihui Retail Group's statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 12% EPS growth in the last year. 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 want to do dive deeper into Zhongmin Baihui Retail Group, you'd also look into what risks it is currently facing. When we did our research, we found 5 warning signs for Zhongmin Baihui Retail Group (3 are significant!) that we believe deserve your full attention.

This note has only looked at a single factor that sheds light on the nature of Zhongmin Baihui Retail Group's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. 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.