Statutory Profit Doesn't Reflect How Good Aeolus Tyre's (SHSE:600469) Earnings Are

The subdued stock price reaction suggests that Aeolus Tyre Co., Ltd.'s (SHSE:600469) strong earnings didn't offer any surprises. Our analysis suggests that investors might be missing some promising details.

View our latest analysis for Aeolus Tyre

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Aeolus Tyre's profit was reduced by CN¥65m, 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. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. 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 Aeolus Tyre to produce a higher profit next year, all else being equal.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Aeolus Tyre.

Our Take On Aeolus Tyre's Profit Performance

Because unusual items detracted from Aeolus Tyre's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Aeolus Tyre's earnings potential is at least as good as it seems, and maybe even better! Furthermore, it has done a great job growing EPS over 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. To help with this, we've discovered 2 warning signs (1 shouldn't be ignored!) that you ought to be aware of before buying any shares in Aeolus Tyre.

This note has only looked at a single factor that sheds light on the nature of Aeolus Tyre'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.

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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.