Yongxing Special Materials TechnologyLtd's (SZSE:002756) Weak Earnings May Only Reveal A Part Of The Whole Picture

The market rallied behind Yongxing Special Materials Technology Co.,Ltd's (SZSE:002756) stock, leading do a rise in the share price after its recent weak earnings report. Sometimes, shareholders are willing to ignore soft numbers with the hope that they will improve, but our analysis suggests this is unlikely for Yongxing Special Materials TechnologyLtd.

Check out our latest analysis for Yongxing Special Materials TechnologyLtd

How Do Unusual Items Influence Profit?

For anyone who wants to understand Yongxing Special Materials TechnologyLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥165m worth of unusual items. 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 Yongxing Special Materials TechnologyLtd doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

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 Yongxing Special Materials TechnologyLtd's Profit Performance

Arguably, Yongxing Special Materials TechnologyLtd's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Yongxing Special Materials TechnologyLtd's statutory profits are better than its underlying earnings power. But on the bright side, its earnings per share have grown at an extremely impressive rate over the last three years. 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. To help with this, we've discovered 2 warning signs (1 can't be ignored!) that you ought to be aware of before buying any shares in Yongxing Special Materials TechnologyLtd.

This note has only looked at a single factor that sheds light on the nature of Yongxing Special Materials TechnologyLtd'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.