Why Shenghe Resources Holding's (SHSE:600392) Shaky Earnings Are Just The Beginning Of Its Problems

The market wasn't impressed with the soft earnings from Shenghe Resources Holding Co., Ltd (SHSE:600392) recently. We did some analysis, and found that there are some reasons to be cautious about the headline numbers.

See our latest analysis for Shenghe Resources Holding

How Do Unusual Items Influence Profit?

For anyone who wants to understand Shenghe Resources Holding's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥127m 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. Shenghe Resources Holding had a rather significant contribution from unusual items relative to its profit to March 2024. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

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 Shenghe Resources Holding's Profit Performance

As we discussed above, we think the significant positive unusual item makes Shenghe Resources Holding's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Shenghe Resources Holding'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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Every company has risks, and we've spotted 3 warning signs for Shenghe Resources Holding you should know about.

Today we've zoomed in on a single data point to better understand the nature of Shenghe Resources Holding'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 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.