Shanghai Yahong Moulding's (SHSE:603159) Solid Profits Have Weak Fundamentals

Despite posting some strong earnings, the market for Shanghai Yahong Moulding Co., Ltd.'s (SHSE:603159) stock hasn't moved much. We did some digging, and we found some concerning factors in the details.

Check out our latest analysis for Shanghai Yahong Moulding

The Impact Of Unusual Items On Profit

For anyone who wants to understand Shanghai Yahong Moulding's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥5.9m worth of unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. Which is hardly surprising, given the name. If Shanghai Yahong Moulding doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Shanghai Yahong Moulding.

Our Take On Shanghai Yahong Moulding's Profit Performance

We'd posit that Shanghai Yahong Moulding's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that Shanghai Yahong Moulding's statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 33% EPS growth in 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. At Simply Wall St, we found 1 warning sign for Shanghai Yahong Moulding and we think they deserve your attention.

This note has only looked at a single factor that sheds light on the nature of Shanghai Yahong Moulding'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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.