Some Investors May Be Willing To Look Past State Grid YingdaLtd's (SHSE:600517) Soft Earnings

Shareholders appeared unconcerned with State Grid Yingda Co.,Ltd.'s (SHSE:600517) lackluster earnings report last week. Our analysis suggests that while the profits are soft, the foundations of the business are strong.

View our latest analysis for State Grid YingdaLtd

How Do Unusual Items Influence Profit?

Importantly, our data indicates that State Grid YingdaLtd's profit was reduced by CN¥380m, due to unusual items, over the last year. 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 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 State Grid YingdaLtd 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 State Grid YingdaLtd.

Our Take On State Grid YingdaLtd's Profit Performance

Because unusual items detracted from State Grid YingdaLtd'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 State Grid YingdaLtd's earnings potential is at least as good as it seems, and maybe even better! And on top of that, its earnings per share have grown at 15% per year over the last three years. 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 State Grid YingdaLtd at this point in time. For example - State Grid YingdaLtd has 1 warning sign we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of State Grid YingdaLtd'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 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.