Bohai Leasing's (SZSE:000415) Solid Earnings Are Supported By Other Strong Factors

The subdued stock price reaction suggests that Bohai Leasing Co., Ltd.'s (SZSE:000415) strong earnings didn't offer any surprises. Our analysis suggests that investors might be missing some promising details.

Check out our latest analysis for Bohai Leasing

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Bohai Leasing's profit was reduced by CN¥1.7b, due to unusual items, over the last year. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. 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 Bohai Leasing 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 Bohai Leasing.

Our Take On Bohai Leasing's Profit Performance

Because unusual items detracted from Bohai Leasing's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Bohai Leasing's statutory profit actually understates its earnings potential! And one can definitely find a positive in the fact that it made a profit this year, despite losing money 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. For instance, we've identified 3 warning signs for Bohai Leasing (2 are concerning) you should be familiar with.

Today we've zoomed in on a single data point to better understand the nature of Bohai Leasing'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.