Shareholders Will Be Pleased With The Quality of Hunan Boyun New MaterialsLtd's (SZSE:002297) Earnings

Hunan Boyun New Materials Co.,Ltd's (SZSE:002297) earnings announcement last week was disappointing for investors, despite the decent profit numbers. We did some digging and actually think they are being unnecessarily pessimistic.

Check out our latest analysis for Hunan Boyun New MaterialsLtd

The Impact Of Unusual Items On Profit

For anyone who wants to understand Hunan Boyun New MaterialsLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥20m due 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. In the twelve months to December 2023, Hunan Boyun New MaterialsLtd had a big unusual items expense. All else being equal, this would likely have the effect of making the statutory profit look worse than its underlying earnings power.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Hunan Boyun New MaterialsLtd.

Our Take On Hunan Boyun New MaterialsLtd's Profit Performance

As we mentioned previously, the Hunan Boyun New MaterialsLtd's profit was hampered by unusual items in the last year. Based on this observation, we consider it possible that Hunan Boyun New MaterialsLtd's statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at 7.1% per year over the last three years. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. So while earnings quality is important, it's equally important to consider the risks facing Hunan Boyun New MaterialsLtd at this point in time. Every company has risks, and we've spotted 1 warning sign for Hunan Boyun New MaterialsLtd you should know about.

This note has only looked at a single factor that sheds light on the nature of Hunan Boyun New MaterialsLtd's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.