There May Be Reason For Hope In Shiyan Taixiang IndustryLtd's (SZSE:301192) Disappointing Earnings

Shiyan Taixiang Industry Co.,Ltd.'s (SZSE:301192) recent soft profit numbers didn't appear to worry shareholders, as the stock price showed strength. We think that investors might be looking at some positive factors beyond the earnings numbers.

View our latest analysis for Shiyan Taixiang IndustryLtd

The Impact Of Unusual Items On Profit

For anyone who wants to understand Shiyan Taixiang IndustryLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥4.0m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. If Shiyan Taixiang IndustryLtd doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming 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

Because unusual items detracted from Shiyan Taixiang IndustryLtd's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Shiyan Taixiang IndustryLtd's statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in 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. So while earnings quality is important, it's equally important to consider the risks facing Shiyan Taixiang IndustryLtd at this point in time. For instance, we've identified 4 warning signs for Shiyan Taixiang IndustryLtd (2 are potentially serious) you should be familiar with.

This note has only looked at a single factor that sheds light on the nature of Shiyan Taixiang IndustryLtd's profit. But there are plenty of other ways to inform your opinion of a company. 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 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.