Earnings Troubles May Signal Larger Issues for Shanghai Haoyuan Chemexpress (SHSE:688131) Shareholders

The subdued market reaction suggests that Shanghai Haoyuan Chemexpress Co., Ltd.'s (SHSE:688131) recent earnings didn't contain any surprises. We think that investors are worried about some weaknesses underlying the earnings.

See our latest analysis for Shanghai Haoyuan Chemexpress

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Shanghai Haoyuan Chemexpress' profit received a boost of CN¥11m in unusual items, over the last year. 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. And that's as you'd expect, given these boosts are described as 'unusual'. If Shanghai Haoyuan Chemexpress 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 Shanghai Haoyuan Chemexpress' Profit Performance

Arguably, Shanghai Haoyuan Chemexpress' statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Shanghai Haoyuan Chemexpress' true underlying earnings power is actually less than its statutory profit. In further bad news, its earnings per share decreased in the last year. 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. So while earnings quality is important, it's equally important to consider the risks facing Shanghai Haoyuan Chemexpress at this point in time. While conducting our analysis, we found that Shanghai Haoyuan Chemexpress has 1 warning sign and it would be unwise to ignore this.

This note has only looked at a single factor that sheds light on the nature of Shanghai Haoyuan Chemexpress' 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 that insiders are buying.

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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.