We Think BOMESC Offshore Engineering's (SHSE:603727) Solid Earnings Are Understated

The market seemed underwhelmed by last week's earnings announcement from BOMESC Offshore Engineering Company Limited (SHSE:603727) despite the healthy numbers. Our analysis suggests that shareholders might be missing some positive underlying factors in the earnings report.

Check out our latest analysis for BOMESC Offshore Engineering

How Do Unusual Items Influence Profit?

For anyone who wants to understand BOMESC Offshore Engineering's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥10m due 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. Assuming those unusual expenses don't come up again, we'd therefore expect BOMESC Offshore Engineering to produce a higher profit next year, all else being equal.

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On BOMESC Offshore Engineering's Profit Performance

Unusual items (expenses) detracted from BOMESC Offshore Engineering's earnings over the last year, but we might see an improvement next year. Because of this, we think BOMESC Offshore Engineering's earnings potential is at least as good as it seems, and maybe even better! And it's also positive that the company showed enough improvement to book a profit this year, after losing money last year. 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 BOMESC Offshore Engineering at this point in time. For example - BOMESC Offshore Engineering has 1 warning sign we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of BOMESC Offshore Engineering'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.