Beijing Jiuzhouyigui Environmental Technology's (SHSE:688485) Conservative Accounting Might Explain Soft Earnings

Beijing Jiuzhouyigui Environmental Technology Co., Ltd.'s (SHSE:688485) recent soft profit numbers didn't appear to worry shareholders, as the stock price showed strength. However, we think the company is showing some signs that things are more promising than they seem.

Check out our latest analysis for Beijing Jiuzhouyigui Environmental Technology

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Beijing Jiuzhouyigui Environmental Technology's profit was reduced by CN¥4.8m, due to unusual items, over the last year. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. If Beijing Jiuzhouyigui Environmental Technology doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Beijing Jiuzhouyigui Environmental Technology.

Our Take On Beijing Jiuzhouyigui Environmental Technology's Profit Performance

Because unusual items detracted from Beijing Jiuzhouyigui Environmental Technology's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Beijing Jiuzhouyigui Environmental Technology's earnings potential is at least as good as it seems, and maybe even better! Unfortunately, though, its earnings per share actually fell back 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 Beijing Jiuzhouyigui Environmental Technology, you'd also look into what risks it is currently facing. To help with this, we've discovered 4 warning signs (1 is concerning!) that you ought to be aware of before buying any shares in Beijing Jiuzhouyigui Environmental Technology.

This note has only looked at a single factor that sheds light on the nature of Beijing Jiuzhouyigui Environmental Technology'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.