Shanghai Conglin Environmental Protection Technology's (SHSE:688370) Anemic Earnings Might Be Worse Than You Think

A lackluster earnings announcement from Shanghai Conglin Environmental Protection Technology Co., Ltd. (SHSE:688370) last week didn't sink the stock price. However, we believe that investors should be aware of some underlying factors which may be of concern.

See our latest analysis for Shanghai Conglin Environmental Protection Technology

How Do Unusual Items Influence Profit?

For anyone who wants to understand Shanghai Conglin Environmental Protection Technology's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥13m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Shanghai Conglin Environmental Protection Technology.

Our Take On Shanghai Conglin Environmental Protection Technology's Profit Performance

We'd posit that Shanghai Conglin Environmental Protection Technology's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that Shanghai Conglin Environmental Protection Technology's true underlying earnings power is actually less than its statutory profit. In further bad news, its earnings per share decreased in the 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 Shanghai Conglin Environmental Protection Technology as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 4 warning signs for Shanghai Conglin Environmental Protection Technology you should be mindful of and 1 of them is potentially serious.

Today we've zoomed in on a single data point to better understand the nature of Shanghai Conglin Environmental Protection Technology'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 with high insider ownership.

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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.