Concerns Surrounding Guangdong Huiyun Titanium Industry's (SZSE:300891) Performance

Guangdong Huiyun Titanium Industry Co., Ltd. (SZSE:300891) just released a solid earnings report, and the stock displayed some strength. Despite this, our analysis suggests that there are some factors weakening the foundations of those good profit numbers.

See our latest analysis for Guangdong Huiyun Titanium Industry

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Guangdong Huiyun Titanium Industry's profit received a boost of CN¥11m 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. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And that's as you'd expect, given these boosts are described as 'unusual'. Guangdong Huiyun Titanium Industry had a rather significant contribution from unusual items relative to its profit to September 2024. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Guangdong Huiyun Titanium Industry.

Our Take On Guangdong Huiyun Titanium Industry's Profit Performance

As we discussed above, we think the significant positive unusual item makes Guangdong Huiyun Titanium Industry's earnings a poor guide to its underlying profitability. For this reason, we think that Guangdong Huiyun Titanium Industry's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. The silver lining is that its EPS growth over the last year has been really wonderful, even if it's not a perfect measure. 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. To that end, you should learn about the 3 warning signs we've spotted with Guangdong Huiyun Titanium Industry (including 2 which are a bit concerning).

This note has only looked at a single factor that sheds light on the nature of Guangdong Huiyun Titanium Industry'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 with significant insider holdings to be useful.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.