Hailir Pesticides and Chemicals GroupLtd's (SHSE:603639) Sluggish Earnings Might Be Just The Beginning Of Its Problems

The market wasn't impressed with the soft earnings from Hailir Pesticides and Chemicals Group Co.,Ltd. (SHSE:603639) recently. We did some further digging and think they have a few more reasons to be concerned beyond the statutory profit.

View our latest analysis for Hailir Pesticides and Chemicals GroupLtd

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Hailir Pesticides and Chemicals GroupLtd's profit received a boost of CN¥19m in unusual items, over the last year. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. If Hailir Pesticides and Chemicals GroupLtd doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On Hailir Pesticides and Chemicals GroupLtd's Profit Performance

We'd posit that Hailir Pesticides and Chemicals GroupLtd's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that Hailir Pesticides and Chemicals GroupLtd's true underlying earnings power is actually less than its statutory profit. In further bad news, its earnings per share decreased 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 while earnings quality is important, it's equally important to consider the risks facing Hailir Pesticides and Chemicals GroupLtd at this point in time. Case in point: We've spotted 2 warning signs for Hailir Pesticides and Chemicals GroupLtd you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Hailir Pesticides and Chemicals GroupLtd's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.