Shanghai SK Petroleum & Chemical Equipment's (SZSE:002278) Earnings May Just Be The Starting Point

Shanghai SK Petroleum & Chemical Equipment Corporation Ltd.'s (SZSE:002278) strong earnings report was rewarded with a positive stock price move. We have done some analysis, and we found several positive factors beyond the profit numbers.

View our latest analysis for Shanghai SK Petroleum & Chemical Equipment

How Do Unusual Items Influence Profit?

To properly understand Shanghai SK Petroleum & Chemical Equipment's profit results, we need to consider the CN¥5.9m 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. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. 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 Shanghai SK Petroleum & Chemical Equipment to produce a higher profit next year, all else being equal.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Shanghai SK Petroleum & Chemical Equipment.

Our Take On Shanghai SK Petroleum & Chemical Equipment's Profit Performance

Unusual items (expenses) detracted from Shanghai SK Petroleum & Chemical Equipment's earnings over the last year, but we might see an improvement next year. Because of this, we think Shanghai SK Petroleum & Chemical Equipment's earnings potential is at least as good as it seems, and maybe even better! And one can definitely find a positive in the fact that it made a profit this year, despite losing money 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. If you want to do dive deeper into Shanghai SK Petroleum & Chemical Equipment, you'd also look into what risks it is currently facing. While conducting our analysis, we found that Shanghai SK Petroleum & Chemical Equipment has 1 warning sign and it would be unwise to ignore this.

This note has only looked at a single factor that sheds light on the nature of Shanghai SK Petroleum & Chemical Equipment's profit. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. 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.