Shiyan Taixiang IndustryLtd's (SZSE:301192) Solid Earnings May Rest On Weak Foundations

The stock price didn't jump after Shiyan Taixiang Industry Co.,Ltd. (SZSE:301192) posted decent earnings last week. We did some digging and believe investors may be worried about some underlying factors in the report.

Check out our latest analysis for Shiyan Taixiang IndustryLtd

How Do Unusual Items Influence Profit?

To properly understand Shiyan Taixiang IndustryLtd's profit results, we need to consider the CN¥3.7m gain attributed to unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. Which is hardly surprising, given the name. If Shiyan Taixiang IndustryLtd 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 Shiyan Taixiang IndustryLtd.

Our Take On Shiyan Taixiang IndustryLtd's Profit Performance

We'd posit that Shiyan Taixiang IndustryLtd's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that Shiyan Taixiang IndustryLtd's true underlying earnings power is actually less than its statutory profit. The good news is that, its earnings per share increased by 36% in the last year. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. If you want to do dive deeper into Shiyan Taixiang IndustryLtd, you'd also look into what risks it is currently facing. To help with this, we've discovered 2 warning signs (1 can't be ignored!) that you ought to be aware of before buying any shares in Shiyan Taixiang IndustryLtd.

This note has only looked at a single factor that sheds light on the nature of Shiyan Taixiang IndustryLtd'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. 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.