Weak Statutory Earnings May Not Tell The Whole Story For Xinyaqiang Silicon ChemistryLtd (SHSE:603155)

The subdued market reaction suggests that Xinyaqiang Silicon Chemistry Co.,Ltd's (SHSE:603155) recent earnings didn't contain any surprises. We think that investors are worried about some weaknesses underlying the earnings.

See our latest analysis for Xinyaqiang Silicon ChemistryLtd

How Do Unusual Items Influence Profit?

To properly understand Xinyaqiang Silicon ChemistryLtd's profit results, we need to consider the CN¥35m gain attributed to unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And, after all, that's exactly what the accounting terminology implies. We can see that Xinyaqiang Silicon ChemistryLtd's positive unusual items were quite significant relative to its profit in the year to September 2024. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger 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 Xinyaqiang Silicon ChemistryLtd.

Our Take On Xinyaqiang Silicon ChemistryLtd's Profit Performance

As we discussed above, we think the significant positive unusual item makes Xinyaqiang Silicon ChemistryLtd's earnings a poor guide to its underlying profitability. For this reason, we think that Xinyaqiang Silicon ChemistryLtd's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Be aware that Xinyaqiang Silicon ChemistryLtd is showing 4 warning signs in our investment analysis and 2 of those make us uncomfortable...

Today we've zoomed in on a single data point to better understand the nature of Xinyaqiang Silicon ChemistryLtd's profit. But there are plenty of other ways to inform your opinion of a company. 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.