We Think That There Are Issues Underlying Shanghai YongLi Belting's (SZSE:300230) Earnings

Despite posting some strong earnings, the market for Shanghai YongLi Belting Co., Ltd's (SZSE:300230) stock hasn't moved much. We did some digging, and we found some concerning factors in the details.

Check out our latest analysis for Shanghai YongLi Belting

How Do Unusual Items Influence Profit?

For anyone who wants to understand Shanghai YongLi Belting's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥144m 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. 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 that's as you'd expect, given these boosts are described as 'unusual'. We can see that Shanghai YongLi Belting's positive unusual items were quite significant relative to its profit in the year to March 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 Shanghai YongLi Belting.

Our Take On Shanghai YongLi Belting's Profit Performance

As we discussed above, we think the significant positive unusual item makes Shanghai YongLi Belting's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Shanghai YongLi Belting's underlying earnings power is lower than its statutory profit. The good news is that, its earnings per share increased by 71% 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Shanghai YongLi Belting.

This note has only looked at a single factor that sheds light on the nature of Shanghai YongLi Belting'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. 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.