Nantong Jiangshan Agrochemical & ChemicalsLtd's (SHSE:600389) Anemic Earnings Might Be Worse Than You Think

The market rallied behind Nantong Jiangshan Agrochemical & Chemicals Co.,Ltd.'s (SHSE:600389) stock, leading do a rise in the share price after its recent weak earnings report. While shareholders may be willing to overlook soft profit numbers, we believe that they should also be taking into account some other factors which may be cause for concern.

See our latest analysis for Nantong Jiangshan Agrochemical & ChemicalsLtd

How Do Unusual Items Influence Profit?

For anyone who wants to understand Nantong Jiangshan Agrochemical & ChemicalsLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥58m 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. Nantong Jiangshan Agrochemical & ChemicalsLtd had a rather significant contribution from unusual items relative to its profit 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.

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On Nantong Jiangshan Agrochemical & ChemicalsLtd's Profit Performance

As previously mentioned, Nantong Jiangshan Agrochemical & ChemicalsLtd's large boost from unusual items won't be there indefinitely, so its statutory earnings are probably a poor guide to its underlying profitability. As a result, we think it may well be the case that Nantong Jiangshan Agrochemical & ChemicalsLtd's underlying earnings power is lower than its statutory profit. Sadly, its EPS was down over the last twelve months. 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. Case in point: We've spotted 2 warning signs for Nantong Jiangshan Agrochemical & ChemicalsLtd you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Nantong Jiangshan Agrochemical & ChemicalsLtd'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.