Minfeng Special PaperLtd's (SHSE:600235) Solid Earnings Have Been Accounted For Conservatively

Minfeng Special Paper Co.,Ltd.'s (SHSE:600235) recent earnings report didn't offer any surprises, with the shares unchanged over the last week. Our analysis suggests that shareholders might be missing some positive underlying factors in the earnings report.

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The Impact Of Unusual Items On Profit

For anyone who wants to understand Minfeng Special PaperLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥11m 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. If Minfeng Special PaperLtd doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Minfeng Special PaperLtd.

Our Take On Minfeng Special PaperLtd's Profit Performance

Unusual items (expenses) detracted from Minfeng Special PaperLtd's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Minfeng Special PaperLtd's statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at 18% per year over the last three years. 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. At Simply Wall St, we found 2 warning signs for Minfeng Special PaperLtd and we think they deserve your attention.

This note has only looked at a single factor that sheds light on the nature of Minfeng Special PaperLtd'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. 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 with significant insider holdings 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.