Xi'an Manareco New MaterialsLtd's (SHSE:688550) Earnings Are Weaker Than They Seem

Despite posting some strong earnings, the market for Xi'an Manareco New Materials Co.,Ltd's (SHSE:688550) stock hasn't moved much. We did some digging, and we found some concerning factors in the details.

View our latest analysis for Xi'an Manareco New MaterialsLtd

The Impact Of Unusual Items On Profit

For anyone who wants to understand Xi'an Manareco New MaterialsLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥21m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. Which is hardly surprising, given the name. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

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 Xi'an Manareco New MaterialsLtd's Profit Performance

Arguably, Xi'an Manareco New MaterialsLtd's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Xi'an Manareco New MaterialsLtd's statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 23% EPS growth in 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. While conducting our analysis, we found that Xi'an Manareco New MaterialsLtd has 1 warning sign and it would be unwise to ignore it.

Today we've zoomed in on a single data point to better understand the nature of Xi'an Manareco New MaterialsLtd'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 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.