Asian Star Anchor Chain Jiangsu's (SHSE:601890) Solid Earnings May Rest On Weak Foundations

Asian Star Anchor Chain Co., Ltd. Jiangsu's (SHSE:601890 ) stock didn't jump after it announced some healthy earnings. Our analysis showed that there are some concerning factors in the earnings that investors may be cautious of.

Check out our latest analysis for Asian Star Anchor Chain Jiangsu

How Do Unusual Items Influence Profit?

To properly understand Asian Star Anchor Chain Jiangsu's profit results, we need to consider the CN¥31m gain attributed to unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. 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'. If Asian Star Anchor Chain Jiangsu 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 Asian Star Anchor Chain Jiangsu's Profit Performance

Arguably, Asian Star Anchor Chain Jiangsu's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Asian Star Anchor Chain Jiangsu's true underlying earnings power is actually less than its statutory profit. But the good news is that its EPS growth over the last three years has been very impressive. 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. If you'd like to know more about Asian Star Anchor Chain Jiangsu as a business, it's important to be aware of any risks it's facing. In terms of investment risks, we've identified 1 warning sign with Asian Star Anchor Chain Jiangsu, and understanding this should be part of your investment process.

This note has only looked at a single factor that sheds light on the nature of Asian Star Anchor Chain Jiangsu'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 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.