There May Be Underlying Issues With The Quality Of Jinxi Axle's (SHSE:600495) Earnings

Jinxi Axle Company Limited's (SHSE:600495) robust earnings report didn't manage to move the market for its stock. Our analysis suggests that shareholders have noticed something concerning in the numbers.

See our latest analysis for Jinxi Axle

How Do Unusual Items Influence Profit?

For anyone who wants to understand Jinxi Axle's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥30m worth of 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. And that's as you'd expect, given these boosts are described as 'unusual'. Jinxi Axle had a rather significant contribution from unusual items relative to its profit to September 2024. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

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

Our Take On Jinxi Axle's Profit Performance

As previously mentioned, Jinxi Axle's large boost from unusual items won't be there indefinitely, so its statutory earnings are probably a poor guide to its underlying profitability. For this reason, we think that Jinxi Axle's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. On the bright side, the company showed enough improvement to book a profit this year, after losing money last year. 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 Jinxi Axle as a business, it's important to be aware of any risks it's facing. For example, Jinxi Axle has 2 warning signs (and 1 which is potentially serious) we think you should know about.

Today we've zoomed in on a single data point to better understand the nature of Jinxi Axle's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.