Can a lucrative business balance its revenue with expenses (of buying some assets) to seem unprofitable on paper?
Maybe to save tax or because they could really use those assets?
My main concern is how do I look out for this strategy because all the things I usually see P/E, RO-whatever, etc. fail and I would judge it the business to be bad.
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Yes, it's possible (and quite legitimate) to do that using depreciation expenses. While there's a large up-front cash expense (a capital expenditure), you then get many years (depending on the usable life of the asset) of depreciation expense that reduces your taxable income. Many capital-intensive businesses can be attractive for just that reason (for example, real estate).
Your question is a bit of a reverse on the common criticism that companies overemphasize non-GAAP numbers (like EBITDA) to appear more profitable (or profitable at all) compared with their GAAP Net Income. But it is certainly true that plenty of companies (especially private ones) factor tax considerations into capital expenditure timing and choices.
Buying assets doesn't affect your profit, because the money stays on your balance sheet as capital assets instead of cash in bank (unless your tax authorities let you report your accounts on a cashflow basis, which for example they do for very small businesses in the UK). You need to actually spend the money on something you can't turn back to cash later for it to reduce your profit.
The key with analyzing financial statements is that you need to look at all angles of a particular item. ie: Sales has gone up, but has the cost of sales increased by even more, implying narrower margins? Or, interest expense has gone up, but is that because new debt was taken on to pay for expansion?
In the specific case you mentioned [buying assets that will create depreciation expense over time], there is a grouping on the cash flow statement called 'Investing', which will state the amount of cash used during the year to invest in the business. This could be a good thing or a bad thing, depending on other factors (and your personal preference regarding dividends being paid to shareholders).
In addition, you can see the amount of depreciation expense separately listed on the cash flow statement. This tells you many things. Consider a company with M in assets on the balance sheet, but M in depreciation expense. This tells you that [in a very loose sense], every 5 years the assets owned by the company will all need to be replaced. Compare that with the Investing section of the cash flow statement - if they are buying M of new assets this year, this tells you that on an overall basis, they are likely expanding the business, because the new investments outpace the depreciation.
But, is your concern of under-reported earnings a common issue?
Typically, keep in mind that the most common bias of a company is to over-report earnings. This is because management compensation (in the form of performance bonuses and stock option valuation) is increased by profitable years. However, in a year where a loss / poor performance is likely, a reverse-bias occurs, to take as much of a loss as possible in that year. This is because if a manager's bonus is already 0 due to poor company performance, having a worse year will not turn the bonus negative. So, by taking all expenses possible today on the financial statements, next year might have less allocated expenses, and therefore the manager might get a bigger bonus impact next year. This is called "Taking a big bath".
Note that public companies must meet certain reporting standards, and they are audited by external accounting firms to show that they meet those standards. Of course, there is no guarantee that the auditors will catch all cases of accounting manipulation (see Enron, etc., etc.).
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