Shaanxi Beiyuan Chemical Industry Group's (SHSE:601568) Soft Earnings Are Actually Better Than They Appear

Shaanxi Beiyuan Chemical Industry Group Co., Ltd.'s (SHSE:601568) earnings announcement last week didn't impress shareholders. Despite the soft profit numbers, our analysis has optimistic about the overall quality of the income statement.

Check out our latest analysis for Shaanxi Beiyuan Chemical Industry Group

How Do Unusual Items Influence Profit?

For anyone who wants to understand Shaanxi Beiyuan Chemical Industry Group's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥499m due 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. In the twelve months to December 2023, Shaanxi Beiyuan Chemical Industry Group had a big unusual items expense. All else being equal, this would likely have the effect of making the statutory profit look worse than its underlying earnings power.

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. Because of this, we think Shaanxi Beiyuan Chemical Industry Group's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! Unfortunately, though, its earnings per share actually fell back over the last year. 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, we've found that Shaanxi Beiyuan Chemical Industry Group has 4 warning signs (2 shouldn't be ignored!) that deserve your attention before going any further with your analysis.

This note has only looked at a single factor that sheds light on 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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.

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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.