There May Be Underlying Issues With The Quality Of Xi'an Shaangu Power's (SHSE:601369) Earnings

Xi'an Shaangu Power Co., Ltd.'s (SHSE:601369) robust earnings report didn't manage to move the market for its stock. We did some digging, and we found some concerning factors in the details.

Check out our latest analysis for Xi'an Shaangu Power

How Do Unusual Items Influence Profit?

To properly understand Xi'an Shaangu Power's profit results, we need to consider the CN¥81m gain attributed to unusual items. 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 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. Which is hardly surprising, given the name. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

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 10.0% 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Every company has risks, and we've spotted 1 warning sign for Xi'an Shaangu Power you should know about.

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. 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 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.