Anhui Tongyuan Environment Energy SavingLtd's (SHSE:688679) Problems Go Beyond Weak Profit

The market wasn't impressed with the soft earnings from Anhui Tongyuan Environment Energy Saving Co.,Ltd (SHSE:688679) recently. Our analysis has found some reasons to be concerned, beyond the weak headline numbers.

Check out our latest analysis for Anhui Tongyuan Environment Energy SavingLtd

The Impact Of Unusual Items On Profit

To properly understand Anhui Tongyuan Environment Energy SavingLtd's profit results, we need to consider the CN¥985k gain attributed to 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. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's as you'd expect, given these boosts are described as 'unusual'. If Anhui Tongyuan Environment Energy SavingLtd doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Anhui Tongyuan Environment Energy SavingLtd.

Our Take On Anhui Tongyuan Environment Energy SavingLtd's Profit Performance

We'd posit that Anhui Tongyuan Environment Energy SavingLtd's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that Anhui Tongyuan Environment Energy SavingLtd's true underlying earnings power is actually less than its statutory profit. Sadly, its EPS was down over the last twelve months. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. So while earnings quality is important, it's equally important to consider the risks facing Anhui Tongyuan Environment Energy SavingLtd at this point in time. Every company has risks, and we've spotted 2 warning signs for Anhui Tongyuan Environment Energy SavingLtd (of which 1 is a bit concerning!) you should know about.

This note has only looked at a single factor that sheds light on the nature of Anhui Tongyuan Environment Energy SavingLtd's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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. 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.