West Shanghai Automotive ServiceLtd's (SHSE:605151) Problems Go Beyond Weak Profit

The market wasn't impressed with the soft earnings from West Shanghai Automotive Service Co.,Ltd. (SHSE:605151) recently. Our analysis has found some reasons to be concerned, beyond the weak headline numbers.

See our latest analysis for West Shanghai Automotive ServiceLtd

How Do Unusual Items Influence Profit?

For anyone who wants to understand West Shanghai Automotive ServiceLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥15m worth of 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. If West Shanghai Automotive ServiceLtd doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of West Shanghai Automotive ServiceLtd.

Our Take On West Shanghai Automotive ServiceLtd's Profit Performance

We'd posit that West Shanghai Automotive ServiceLtd's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that West Shanghai Automotive ServiceLtd's statutory profits are better than its underlying earnings power. Sadly, its EPS was down over the last twelve months. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. If you'd like to know more about West Shanghai Automotive ServiceLtd as a business, it's important to be aware of any risks it's facing. While conducting our analysis, we found that West Shanghai Automotive ServiceLtd 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 West Shanghai Automotive ServiceLtd'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 with high insider ownership.

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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.