We Think That There Are More Issues For Shandong Kaisheng New MaterialsLtd (SZSE:301069) Than Just Sluggish Earnings

Shandong Kaisheng New Materials Co.,Ltd.'s (SZSE:301069) recent weak earnings report didn't cause a big stock movement. We think that investors are worried about some weaknesses underlying the earnings.

Check out our latest analysis for Shandong Kaisheng New MaterialsLtd

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Shandong Kaisheng New MaterialsLtd's profit received a boost of CN¥8.2m 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. 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 Shandong Kaisheng New MaterialsLtd 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 Shandong Kaisheng New MaterialsLtd.

Our Take On Shandong Kaisheng New MaterialsLtd's Profit Performance

We'd posit that Shandong Kaisheng New MaterialsLtd's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that Shandong Kaisheng New MaterialsLtd's true underlying earnings power is actually less than its statutory profit. Sadly, its EPS was down over the last twelve months. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. When we did our research, we found 4 warning signs for Shandong Kaisheng New MaterialsLtd (1 is significant!) that we believe deserve your full attention.

Today we've zoomed in on a single data point to better understand the nature of Shandong Kaisheng New MaterialsLtd's profit. But there are plenty of other ways to inform your opinion of a company. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. 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.