Why Shandong Sacred Sun Power SourcesLtd's (SZSE:002580) Shaky Earnings Are Just The Beginning Of Its Problems

Last week's earnings announcement from Shandong Sacred Sun Power Sources Co.,Ltd (SZSE:002580) was disappointing to investors, with a sluggish profit figure. We did some analysis, and found that there are some reasons to be cautious about the headline numbers.

View our latest analysis for Shandong Sacred Sun Power SourcesLtd

The Impact Of Unusual Items On Profit

For anyone who wants to understand Shandong Sacred Sun Power SourcesLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥37m worth of unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And, after all, that's exactly what the accounting terminology implies. Shandong Sacred Sun Power SourcesLtd had a rather significant contribution from unusual items relative to its profit to September 2024. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Shandong Sacred Sun Power SourcesLtd.

Our Take On Shandong Sacred Sun Power SourcesLtd's Profit Performance

As previously mentioned, Shandong Sacred Sun Power SourcesLtd's large boost from unusual items won't be there indefinitely, so its statutory earnings are probably a poor guide to its underlying profitability. For this reason, we think that Shandong Sacred Sun Power SourcesLtd's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. But the good news is that its EPS growth over the last three years has been very impressive. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example - Shandong Sacred Sun Power SourcesLtd has 2 warning signs we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Shandong Sacred Sun Power SourcesLtd'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. 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 with significant insider holdings 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.