Hello, everyone, today is the sixth lecture in a series of valuation courses!

Teacher Yang Jinqiao continues to explain "profit" in 1.2W words.

Niu friends, hurry up to move the small bench, take good notebooks, and start the class!

See the last part for details."when we talk about 18 kinds of profits, what are we talking about? (above) "

See for details in the middle part."when we talk about 18 kinds of profits, what are we talking about? (middle) "

Learning to look at the [profit] subjects in different markets and how to apply them is the next part of this article.

How to treat the [profit] subjects in different markets?

Profit subjects in different markets are not good or bad, in essence, they are all to better reflect the actual operating results of a company in a certain accounting period, only in comparability, the name of profit subjects, and the specific caliber of calculation, there will be differences in these three aspects.

From the perspective of comparabilityThe comparability of profit subjects of A-share listed companies is undoubtedly the best.After all, CAS and China Securities Regulatory Commission clearly stipulated that A-share listed companies should present the income statement in accordance with a fixed format, a unified subject name and a consistent calculation method. As the vast majority of American listed companies are compiled by GAAP, the comparability of profit subjects of American listed companies is better than that of Hong Kong listed companies, considering that Hong Kong listed companies follow a variety of criteria, not only according to IIFRS, CAS, but also according to GAAP.

However, in view of the fact that GAAP and IFRS do not clearly define the specific format of the income statement and the subtotal subjects in the middle, listed companies that also adopt GAAP or IFRS are likely to use different calculation caliber to present some profit subjects, such as operating profit, EBITDA and so on.

As for the name of the profit subject and the specific calculation caliber, it has been fully presented in the previous part of the article, and I will not repeat it here.

However, for investors who want to compare cross-market listed companies, special attention should be paid to whether it is necessary to adjust the profit subjects to be compared according to the provisions of different standards.

How should [profit] subjects be used in daily investment?

How to use it can be said to be the most meaningful content of investment. In order to better present this part of the content, I will follow the form of questions and answers one by one.

Q1: what profit subjects should investors pay most attention to if they invest in listed companies in A shares, Hong Kong stocks and US stocks?

Personal suggestion, in view of the large number of profit subjects, no matter which market investors invest in, the number of profit subjects that investors are most concerned about should not be too much, and less than 5 would be better.

For A-share listed companiesGross profit, operating profit, return net profit, and deduction of non-return net profit are the four profit categories that deserve the most attention.

For Hong Kong listed companies, gross profit, operating profit (or adjusted operating profit, if any), home net profit (or Non-IFRS home net profit, if any), and EBITDA (or adjusted EBITDA, if any) are the four profit categories that deserve the most attention.

For listed companies in the United States, gross profit, operating profit (or adjusted operating profit, if any), home net profit (or Non-GAAP home net profit, if any), and EBITDA (or adjusted EBITDA, if any) are the four profit categories that deserve the most attention.

As to why the above profit subjects are more important than those which have not been mentioned?

The core reason is that, compared to non-recurring gains and losses that are not related to day-to-day business activitiesThe profits generated by daily business activities are truly sustainable and reflect the actual business performance of the enterprise.。

Therefore,If only one profit subject can be selected for analysis, then the deduction of non-parent net profit of A-share listed companies can be said to be the most important profit subject. Similarly, Non-IFRS homing net profit and Non-GAAP are the most important profit subjects for listed companies in Hong Kong stocks and US stocks, respectively.。

Q2: after determining the profit subjects that need the most attention, how to carry out specific application and comparative analysis?

Considering that the profit account itself cannot provide comprehensive profit information, investors not only pay attention to the absolute size of the profit figures.What is more important is to compare the profits horizontally and vertically.。

以$JD.com (JD.US) $As an exampleIn addition to paying attention to the net profit of JD.com 's latest financial report, it is more important for investors to compare the net profit of the latest financial report with that of the same period in history to analyze the changing trend of net profit.For example$BABA (BABA.US) $、$Pinduoduo (PDD.US) $、$Vipshop Holdings Limited (VIPS.US) $Compared with the net profit of the same period. Furthermore, more incremental decision information is mined in the comparison.

It is worth mentioning that before comparing profit subjects horizontally and vertically, investors need to pay attention to the core issue of "comparability".

Taking JD.com 's operating profits as an example, before making a comparison, it is necessary for investors to analyze the composition and calculation caliber of JD.com 's operating profits, and then consider whether adjustments in certain subjects are needed when making horizontal comparisons, so as to enhance comparability on the basis of a unified calculation caliber.

In addition to horizontal and vertical comparisons, it is also recommended that:

(1) sales percentage analysis, that is, dividing each subject of the income statement by total operating income, so that the proportion of cost to revenue and the key subjects affecting net profit can be obtained more intuitively.

(2) calculate the core indicators of a company's profit, such as return on net assets (ROE) and return on invested capital (ROIC), based on specific profit subjects, such as deducting non-net profit.

Q3: what else do you need to pay attention to beyond the profit figure itself?

Profit can be said to be the accounting subject that investors pay most attention to, but if investors only focus on the profit figures themselves, it has laid a huge risk.

The core logic is that if investors only focus on the profit numbers themselves, then the implicit assumption is that investors believe that the profit figures given by listed companies are credible, true and sustainable.In my opinion, blindly trusting the profit figures given by listed companies is extremely lazy and irresponsible.。

The right thing to do is that investors should not only focus on profits, but also, more importantly,Is the profit true? Is profitability sustainable? What is the quality of earnings? And the growth space for the future profits of the enterprise?These four points are the real core.

(1) as to whether the profit is true or false, it involves the judgment of whether the listed company makes financial fraud or not, which is a topic worthy of in-depth discussion.There will be a separate analysis later.

(2) forSustainable profitabilityThe judgment focuses on the non-recurring profit and loss items of the company in many accounting periods, and analyzes the changing trend of deducting non-return net profit. After all, non-recurring gains and losses already include a variety of gains and losses that have nothing to do with the day-to-day operation of the company.

(3) forProfit qualityThere are three main indicators to measure the judgment, which are:

a. Deducting non-net profit / net profit, the closer the ratio is to 1, the greater the proportion of net profit from daily operation, that is, the higher the quality of profit.

b. The closer the ratio of net operating cash flow to net profit is 1 (which may be greater than 1), the higher the "gold content" of net profit, that is, whether the company earns book profit in the accounting sense or cash.

c. The closer the ratio of cash / sales income received from the sale of goods and services is 1 (it may be greater than 1), indicating that the higher the sales quality of the company is, to some extent, it can reflect the company's business model and the supply and demand of its products and services.

(4) as for enterprisesThe growth space of future profitsThis should be the core factor driving the stock price of listed companies, which can be analyzed from the revenue side as well as the cost side.

A thousand words can be summed up into a correct nonsense: understanding the essence behind profits and knowing how to use them are innumerable times more important than knowing the number itself.

So, when we talk about profits, what do we talk about?

In essence, it is to explore the types of profit subjects, the reasons for the large number of profit subjects, how to treat the profit subjects under different criteria, and how to make good use of profit subjects in investment.

Note:

Reference:

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