Concerns Surrounding Xi'an Shaangu Power's (SHSE:601369) Performance

The market shrugged off Xi'an Shaangu Power Co., Ltd.'s (SHSE:601369) solid earnings report. We think that investors might be worried about some concerning underlying factors.

Check out our latest analysis for Xi'an Shaangu Power

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Xi'an Shaangu Power's profit received a boost of CN¥91m in unusual items, over the last year. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. If Xi'an Shaangu Power doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On Xi'an Shaangu Power's Profit Performance

Arguably, Xi'an Shaangu Power's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Xi'an Shaangu Power's true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 29% per annum growth in EPS for the last three. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. So while earnings quality is important, it's equally important to consider the risks facing Xi'an Shaangu Power at this point in time. You'd be interested to know, that we found 1 warning sign for Xi'an Shaangu Power and you'll want to know about it.

Today we've zoomed in on a single data point to better understand the nature of Xi'an Shaangu Power'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 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.