Earnings Troubles May Signal Larger Issues for Tianshan Material (SZSE:000877) Shareholders

Investors were disappointed by Tianshan Material Co., Ltd.'s (SZSE:000877 ) latest earnings release. We did some analysis, and found that there are some reasons to be cautious about the headline numbers.

Check out our latest analysis for Tianshan Material

The Impact Of Unusual Items On Profit

For anyone who wants to understand Tianshan Material's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥1.6b 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. And that's as you'd expect, given these boosts are described as 'unusual'. Tianshan Material had a rather significant contribution from unusual items relative to its profit to March 2024. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

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 Tianshan Material's Profit Performance

As we discussed above, we think the significant positive unusual item makes Tianshan Material's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Tianshan Material's underlying earnings power is lower than its statutory profit. Sadly, its EPS was down over the last twelve months. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. If you want to do dive deeper into Tianshan Material, you'd also look into what risks it is currently facing. To that end, you should learn about the 4 warning signs we've spotted with Tianshan Material (including 1 which is significant).

Today we've zoomed in on a single data point to better understand the nature of Tianshan Material'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.

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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.