China Resources and EnvironmentLtd's (SHSE:600217) Performance Is Even Better Than Its Earnings Suggest

China Resources and Environment Co.,Ltd. (SHSE:600217) just reported healthy earnings but the stock price didn't move much. Our analysis suggests that investors might be missing some promising details.

View our latest analysis for China Resources and EnvironmentLtd

How Do Unusual Items Influence Profit?

For anyone who wants to understand China Resources and EnvironmentLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥218m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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 March 2024, China Resources and EnvironmentLtd had a big unusual items expense. As a result, we can surmise that the unusual items made its statutory profit significantly weaker than it would otherwise be.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of China Resources and EnvironmentLtd.

Our Take On China Resources and EnvironmentLtd's Profit Performance

As we discussed above, we think the significant unusual expense will make China Resources and EnvironmentLtd's statutory profit lower than it would otherwise have been. Because of this, we think China Resources and EnvironmentLtd's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! And on top of that, its earnings per share have grown at an extremely impressive rate over 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. If you want to do dive deeper into China Resources and EnvironmentLtd, you'd also look into what risks it is currently facing. To help with this, we've discovered 3 warning signs (2 can't be ignored!) that you ought to be aware of before buying any shares in China Resources and EnvironmentLtd.

This note has only looked at a single factor that sheds light on the nature of China Resources and EnvironmentLtd'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.