Investors Can Find Comfort In Shaanxi Beiyuan Chemical Industry Group's (SHSE:601568) Earnings Quality

Soft earnings didn't appear to concern Shaanxi Beiyuan Chemical Industry Group Co., Ltd.'s (SHSE:601568) shareholders over the last week. We did some digging, and we believe the earnings are stronger than they seem.

Check out our latest analysis for Shaanxi Beiyuan Chemical Industry Group

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Shaanxi Beiyuan Chemical Industry Group's profit was reduced by CN¥492m, due to unusual items, over the last year. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. 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. Shaanxi Beiyuan Chemical Industry Group took a rather significant hit from unusual items in the year to September 2024. As a result, we can surmise that the unusual items made its statutory profit significantly weaker than it would otherwise be.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Shaanxi Beiyuan Chemical Industry Group.

Our Take On Shaanxi Beiyuan Chemical Industry Group's Profit Performance

As we discussed above, we think the significant unusual expense will make Shaanxi Beiyuan Chemical Industry Group's statutory profit lower than it would otherwise have been. Based on this observation, we consider it possible that Shaanxi Beiyuan Chemical Industry Group's statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in the last twelve months. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. If you'd like to know more about Shaanxi Beiyuan Chemical Industry Group as a business, it's important to be aware of any risks it's facing. To help with this, we've discovered 4 warning signs (2 are concerning!) that you ought to be aware of before buying any shares in Shaanxi Beiyuan Chemical Industry Group.

Today we've zoomed in on a single data point to better understand the nature of Shaanxi Beiyuan Chemical Industry Group'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 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.