Sinopec Oilfield Equipment (SZSE:000852) Strong Profits May Be Masking Some Underlying Issues

Sinopec Oilfield Equipment Corporation's (SZSE:000852) robust recent earnings didn't do much to move the stock. We believe that shareholders have noticed some concerning factors beyond the statutory profit numbers.

View our latest analysis for Sinopec Oilfield Equipment

The Impact Of Unusual Items On Profit

To properly understand Sinopec Oilfield Equipment's profit results, we need to consider the CN¥34m 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. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And, after all, that's exactly what the accounting terminology implies. If Sinopec Oilfield Equipment 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 Sinopec Oilfield Equipment.

Our Take On Sinopec Oilfield Equipment's Profit Performance

Arguably, Sinopec Oilfield Equipment's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Sinopec Oilfield Equipment's true underlying earnings power is actually less than its statutory profit. But the good news is that its EPS growth over the last three years has been very impressive. 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. If you'd like to know more about Sinopec Oilfield Equipment as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 2 warning signs for Sinopec Oilfield Equipment you should be mindful of and 1 of these bad boys is significant.

This note has only looked at a single factor that sheds light on the nature of Sinopec Oilfield Equipment'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.