Jinlihua Electric's (SZSE:300069) Earnings May Just Be The Starting Point

Jinlihua Electric Co., Ltd.'s (SZSE:300069) strong earnings report was rewarded with a positive stock price move. We have done some analysis, and we found several positive factors beyond the profit numbers.

View our latest analysis for Jinlihua Electric

The Impact Of Unusual Items On Profit

For anyone who wants to understand Jinlihua Electric's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥1.9m 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. 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. In the twelve months to March 2024, Jinlihua Electric 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 Jinlihua Electric.

Our Take On Jinlihua Electric's Profit Performance

As we discussed above, we think the significant unusual expense will make Jinlihua Electric's statutory profit lower than it would otherwise have been. Because of this, we think Jinlihua Electric's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! And one can definitely find a positive in the fact that it made a profit this year, despite losing money last year. 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. If you'd like to know more about Jinlihua Electric as a business, it's important to be aware of any risks it's facing. While conducting our analysis, we found that Jinlihua Electric has 1 warning sign and it would be unwise to ignore this.

Today we've zoomed in on a single data point to better understand the nature of Jinlihua Electric'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. 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 that insiders are buying 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.