There May Be Reason For Hope In Xiamen Yanjan New Material's (SZSE:300658) Disappointing Earnings

Xiamen Yanjan New Material Co., Ltd.'s (SZSE:300658) recent soft profit numbers didn't appear to worry shareholders, as the stock price showed strength. Our analysis suggests that investors may have noticed some promising signs beyond the statutory profit figures.

Check out our latest analysis for Xiamen Yanjan New Material

The Impact Of Unusual Items On Profit

To properly understand Xiamen Yanjan New Material's profit results, we need to consider the CN¥22m expense attributed 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. If Xiamen Yanjan New Material doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Xiamen Yanjan New Material.

Our Take On Xiamen Yanjan New Material's Profit Performance

Because unusual items detracted from Xiamen Yanjan New Material's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Xiamen Yanjan New Material's earnings potential is at least as good as it seems, and maybe even better! Unfortunately, though, its earnings per share actually fell back 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. To help with this, we've discovered 3 warning signs (1 is concerning!) that you ought to be aware of before buying any shares in Xiamen Yanjan New Material.

Today we've zoomed in on a single data point to better understand the nature of Xiamen Yanjan New Material's profit. But there are plenty of other ways to inform your opinion of a company. 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. 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.