Shandong Huatai Paper Industry ShareholdingLtd's (SHSE:600308) Weak Earnings May Only Reveal A Part Of The Whole Picture

Last week's earnings announcement from Shandong Huatai Paper Industry Shareholding Co.,Ltd (SHSE:600308) was disappointing to investors, with a sluggish profit figure. We did some analysis, and found that there are some reasons to be cautious about the headline numbers.

View our latest analysis for Shandong Huatai Paper Industry ShareholdingLtd

How Do Unusual Items Influence Profit?

For anyone who wants to understand Shandong Huatai Paper Industry ShareholdingLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥322m worth of unusual items. 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 analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. We can see that Shandong Huatai Paper Industry ShareholdingLtd's positive unusual items were quite significant relative to its profit in the year to December 2023. 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 Shandong Huatai Paper Industry ShareholdingLtd.

Our Take On Shandong Huatai Paper Industry ShareholdingLtd's Profit Performance

As we discussed above, we think the significant positive unusual item makes Shandong Huatai Paper Industry ShareholdingLtd's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Shandong Huatai Paper Industry ShareholdingLtd's underlying earnings power is lower than its statutory profit. In further bad news, its earnings per share decreased 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. If you'd like to know more about Shandong Huatai Paper Industry ShareholdingLtd as a business, it's important to be aware of any risks it's facing. To that end, you should learn about the 4 warning signs we've spotted with Shandong Huatai Paper Industry ShareholdingLtd (including 1 which is a bit concerning).

Today we've zoomed in on a single data point to better understand the nature of Shandong Huatai Paper Industry ShareholdingLtd'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.