Malion New Materials' (SZSE:300586) Soft Earnings Are Actually Better Than They Appear

The market was pleased with the recent earnings report from Malion New Materials Co., Ltd. (SZSE:300586), despite the profit numbers being soft. We think that investors might be looking at some positive factors beyond the earnings numbers.

See our latest analysis for Malion New Materials

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Malion New Materials' profit was reduced by CN¥24m, due to unusual items, over the last year. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. If Malion New Materials doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Malion New Materials.

Our Take On Malion New Materials' Profit Performance

Because unusual items detracted from Malion New Materials' earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Malion New Materials' earnings potential is at least as good as it seems, and maybe even better! And on top of that, its earnings per share have grown at 54% per year 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. If you'd like to know more about Malion New Materials as a business, it's important to be aware of any risks it's facing. At Simply Wall St, we found 2 warning signs for Malion New Materials and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of Malion New Materials' 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.