Anhui Sierte Fertilizer industry company's (SZSE:002538) Profits May Not Reveal Underlying Issues

The market shrugged off Anhui Sierte Fertilizer industry LTD. ,company's (SZSE:002538) solid earnings report. We think that investors might be worried about some concerning underlying factors.

See our latest analysis for Anhui Sierte Fertilizer industry company

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Anhui Sierte Fertilizer industry company's profit received a boost of CN¥47m in unusual items, over the last year. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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. 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).

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Anhui Sierte Fertilizer industry company.

Our Take On Anhui Sierte Fertilizer industry company's Profit Performance

Arguably, Anhui Sierte Fertilizer industry company's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Anhui Sierte Fertilizer industry company's true underlying earnings power is actually less than its statutory profit. The good news is that, its earnings per share increased by 71% in the last year. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For instance, we've identified 2 warning signs for Anhui Sierte Fertilizer industry company (1 shouldn't be ignored) you should be familiar with.

This note has only looked at a single factor that sheds light on the nature of Anhui Sierte Fertilizer industry company'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.