Yangzhou Seashine New MaterialsLtd's (SZSE:300885) Weak Earnings May Only Reveal A Part Of The Whole Picture

The market rallied behind Yangzhou Seashine New Materials Co.,Ltd.'s (SZSE:300885) stock, leading do a rise in the share price after its recent weak earnings report. Sometimes, shareholders are willing to ignore soft numbers with the hope that they will improve, but our analysis suggests this is unlikely for Yangzhou Seashine New MaterialsLtd.

View our latest analysis for Yangzhou Seashine New MaterialsLtd

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Yangzhou Seashine New MaterialsLtd's profit received a boost of CN¥3.1m in unusual items, over the last year. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. 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 Yangzhou Seashine New MaterialsLtd.

Our Take On Yangzhou Seashine New MaterialsLtd's Profit Performance

Arguably, Yangzhou Seashine New MaterialsLtd's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Yangzhou Seashine New MaterialsLtd'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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Case in point: We've spotted 2 warning signs for Yangzhou Seashine New MaterialsLtd you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Yangzhou Seashine New MaterialsLtd'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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.