Henan Yuguang Gold&LeadLtd (SHSE:600531) Is Posting Promising Earnings But The Good News Doesn’t Stop There

The market seemed underwhelmed by last week's earnings announcement from Henan Yuguang Gold&Lead Co.,Ltd. (SHSE:600531) despite the healthy numbers. We did some digging, and we think that investors are missing some encouraging factors in the underlying numbers.

View our latest analysis for Henan Yuguang Gold&LeadLtd

The Impact Of Unusual Items On Profit

To properly understand Henan Yuguang Gold&LeadLtd's profit results, we need to consider the CN¥436m expense attributed 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. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect Henan Yuguang Gold&LeadLtd to produce a higher profit next year, all else being equal.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Henan Yuguang Gold&LeadLtd.

Our Take On Henan Yuguang Gold&LeadLtd's Profit Performance

Because unusual items detracted from Henan Yuguang Gold&LeadLtd's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Henan Yuguang Gold&LeadLtd's earnings potential is at least as good as it seems, and maybe even better! And the EPS is up 19% annually, over the last three years. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. To help with this, we've discovered 3 warning signs (1 is concerning!) that you ought to be aware of before buying any shares in Henan Yuguang Gold&LeadLtd.

Today we've zoomed in on a single data point to better understand the nature of Henan Yuguang Gold&LeadLtd's profit. But there are plenty of other ways to inform your opinion of a company. 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.