Xiamen Solex High-tech Industries' (SHSE:603992) Earnings May Just Be The Starting Point

The subdued stock price reaction suggests that Xiamen Solex High-tech Industries Co., Ltd.'s (SHSE:603992) strong earnings didn't offer any surprises. Our analysis suggests that investors might be missing some promising details.

View our latest analysis for Xiamen Solex High-tech Industries

How Do Unusual Items Influence Profit?

To properly understand Xiamen Solex High-tech Industries' profit results, we need to consider the CN¥69m expense attributed to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Xiamen Solex High-tech Industries to produce a higher profit next year, all else being equal.

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 Xiamen Solex High-tech Industries' Profit Performance

Because unusual items detracted from Xiamen Solex High-tech Industries' earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Xiamen Solex High-tech Industries' earnings potential is at least as good as it seems, and maybe even better! Furthermore, it has done a great job growing EPS over 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. If you want to do dive deeper into Xiamen Solex High-tech Industries, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 1 warning sign for Xiamen Solex High-tech Industries and you'll want to know about this.

This note has only looked at a single factor that sheds light on the nature of Xiamen Solex High-tech Industries' 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. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying to be useful.

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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.