Hunan Haili Chemical IndustryLtd's (SHSE:600731) Anemic Earnings Might Be Worse Than You Think

The subdued market reaction suggests that Hunan Haili Chemical Industry Co.,Ltd.'s (SHSE:600731) recent earnings didn't contain any surprises. However, we believe that investors should be aware of some underlying factors which may be of concern.

View our latest analysis for Hunan Haili Chemical IndustryLtd

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Hunan Haili Chemical IndustryLtd's profit received a boost of CN¥91m in unusual items, over the last year. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's as you'd expect, given these boosts are described as 'unusual'. We can see that Hunan Haili Chemical IndustryLtd's positive unusual items were quite significant relative to its profit in the year 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.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Hunan Haili Chemical IndustryLtd.

Our Take On Hunan Haili Chemical IndustryLtd's Profit Performance

As we discussed above, we think the significant positive unusual item makes Hunan Haili Chemical IndustryLtd's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Hunan Haili Chemical IndustryLtd'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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example - Hunan Haili Chemical IndustryLtd has 2 warning signs we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Hunan Haili Chemical IndustryLtd'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.