Solid Earnings May Not Tell The Whole Story For Guangdong JingYi MetalLtd (SZSE:002295)

The market for Guangdong JingYi Metal CO.,Ltd's (SZSE:002295) stock was strong after it released a healthy earnings report last week. While the profit numbers were good, our analysis has found some concerning factors that shareholders should be aware of.

View our latest analysis for Guangdong JingYi MetalLtd

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Guangdong JingYi MetalLtd's profit received a boost of CN¥8.8m in unusual items, over the last year. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. 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. If Guangdong JingYi MetalLtd 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 Guangdong JingYi MetalLtd.

Our Take On Guangdong JingYi MetalLtd's Profit Performance

Arguably, Guangdong JingYi MetalLtd's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Guangdong JingYi MetalLtd's statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 31% 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. For example, we've found that Guangdong JingYi MetalLtd has 4 warning signs (1 is potentially serious!) that deserve your attention before going any further with your analysis.

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