There May Be Underlying Issues With The Quality Of Gansu Yasheng Industrial (Group)'s (SHSE:600108) Earnings

Gansu Yasheng Industrial (Group) Co., Ltd.'s (SHSE:600108) robust earnings report didn't manage to move the market for its stock. Our analysis suggests that shareholders have noticed something concerning in the numbers.

View our latest analysis for Gansu Yasheng Industrial (Group)

The Impact Of Unusual Items On Profit

For anyone who wants to understand Gansu Yasheng Industrial (Group)'s profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥61m worth of unusual items. 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. And, after all, that's exactly what the accounting terminology implies. We can see that Gansu Yasheng Industrial (Group)'s positive unusual items were quite significant relative to its profit in the year to March 2024. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Gansu Yasheng Industrial (Group).

Our Take On Gansu Yasheng Industrial (Group)'s Profit Performance

As we discussed above, we think the significant positive unusual item makes Gansu Yasheng Industrial (Group)'s earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Gansu Yasheng Industrial (Group)'s underlying earnings power is lower than its statutory profit. The good news is that, its earnings per share increased by 29% in the 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 if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example, we've found that Gansu Yasheng Industrial (Group) has 2 warning signs (1 can't be ignored!) that deserve your attention before going any further with your analysis.

This note has only looked at a single factor that sheds light on the nature of Gansu Yasheng Industrial (Group)'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. 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.