Investors Shouldn't Be Too Comfortable With XinJiang Beiken Energy EngineeringLtd's (SZSE:002828) Earnings

Unsurprisingly, XinJiang Beiken Energy Engineering Co.,Ltd.'s (SZSE:002828) stock price was strong on the back of its healthy earnings report. We did some analysis and think that investors are missing some details hidden beneath the profit numbers.

Check out our latest analysis for XinJiang Beiken Energy EngineeringLtd

How Do Unusual Items Influence Profit?

Importantly, our data indicates that XinJiang Beiken Energy EngineeringLtd's profit received a boost of CN¥8.4m in unusual items, over the last year. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And, after all, that's exactly what the accounting terminology implies. If XinJiang Beiken Energy EngineeringLtd 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 XinJiang Beiken Energy EngineeringLtd.

Our Take On XinJiang Beiken Energy EngineeringLtd's Profit Performance

We'd posit that XinJiang Beiken Energy EngineeringLtd's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that XinJiang Beiken Energy EngineeringLtd's true underlying earnings power is actually less than its statutory profit. The good news is that it earned a profit in the last twelve months, despite its previous loss. 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. Be aware that XinJiang Beiken Energy EngineeringLtd is showing 3 warning signs in our investment analysis and 1 of those is a bit unpleasant...

This note has only looked at a single factor that sheds light on the nature of XinJiang Beiken Energy EngineeringLtd'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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.

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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.