TangshanJidong Equipment and EngineeringLtd's (SZSE:000856) Shareholders May Want To Dig Deeper Than Statutory Profit

The recent earnings posted by TangshanJidong Equipment and Engineering Co.,Ltd. (SZSE:000856) were solid, but the stock didn't move as much as we expected. We think this is due to investors looking beyond the statutory profits and being concerned with what they see.

Check out our latest analysis for TangshanJidong Equipment and EngineeringLtd

The Impact Of Unusual Items On Profit

For anyone who wants to understand TangshanJidong Equipment and EngineeringLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥3.7m worth of 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 analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. If TangshanJidong Equipment and EngineeringLtd doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of TangshanJidong Equipment and EngineeringLtd.

Our Take On TangshanJidong Equipment and EngineeringLtd's Profit Performance

We'd posit that TangshanJidong Equipment and EngineeringLtd's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that TangshanJidong Equipment and EngineeringLtd's statutory profits are better than its underlying earnings power. The good news is that its earnings per share increased slightly in 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. While earnings are important, another area to consider is the balance sheet. You can see our latest analysis on TangshanJidong Equipment and EngineeringLtd's balance sheet health here.

Today we've zoomed in on a single data point to better understand the nature of TangshanJidong Equipment and EngineeringLtd's profit. But there are plenty of other ways to inform your opinion of a company. 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 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.