Weak Statutory Earnings May Not Tell The Whole Story For Jiangsu Yueda Investment (SHSE:600805)

The market rallied behind Jiangsu Yueda Investment Co., Ltd.'s (SHSE:600805) stock, leading do a rise in the share price after its recent weak earnings report. Sometimes, shareholders are willing to ignore soft numbers with the hope that they will improve, but our analysis suggests this is unlikely for Jiangsu Yueda Investment.

See our latest analysis for Jiangsu Yueda Investment

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Jiangsu Yueda Investment's profit received a boost of CN¥119m in unusual items, over the last year. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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 that's as you'd expect, given these boosts are described as 'unusual'. We can see that Jiangsu Yueda Investment's positive unusual items were quite significant relative to its profit in the year to December 2023. 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 Jiangsu Yueda Investment.

Our Take On Jiangsu Yueda Investment's Profit Performance

As we discussed above, we think the significant positive unusual item makes Jiangsu Yueda Investment's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Jiangsu Yueda Investment's underlying earnings power is lower than its statutory profit. In further bad news, its earnings per share decreased 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. So while earnings quality is important, it's equally important to consider the risks facing Jiangsu Yueda Investment at this point in time. When we did our research, we found 3 warning signs for Jiangsu Yueda Investment (1 is concerning!) that we believe deserve your full attention.

Today we've zoomed in on a single data point to better understand the nature of Jiangsu Yueda Investment'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.