Orinko Advanced PlasticsLTD's (SHSE:688219) Earnings Are Weaker Than They Seem

Orinko Advanced Plastics Co.,LTD (SHSE:688219) announced strong profits, but the stock was stagnant. Our analysis suggests that shareholders have noticed something concerning in the numbers.

Check out our latest analysis for Orinko Advanced PlasticsLTD

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Orinko Advanced PlasticsLTD's profit received a boost of CN¥29m 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 Orinko Advanced PlasticsLTD 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 Orinko Advanced PlasticsLTD.

Our Take On Orinko Advanced PlasticsLTD's Profit Performance

Arguably, Orinko Advanced PlasticsLTD's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Orinko Advanced PlasticsLTD's statutory profits are better than its underlying earnings power. But the happy news is that, while acknowledging we have to look beyond the statutory numbers, those numbers are still improving, with EPS growing at a very high rate over the last year. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. If you want to do dive deeper into Orinko Advanced PlasticsLTD, you'd also look into what risks it is currently facing. Be aware that Orinko Advanced PlasticsLTD is showing 3 warning signs in our investment analysis and 2 of those can't be ignored...

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

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.

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