Earnings Troubles May Signal Larger Issues for Orient International Enterprise (SHSE:600278) Shareholders

A lackluster earnings announcement from Orient International Enterprise, Ltd. (SHSE:600278) last week didn't sink the stock price. We think that investors are worried about some weaknesses underlying the earnings.

View our latest analysis for Orient International Enterprise

How Do Unusual Items Influence Profit?

To properly understand Orient International Enterprise's profit results, we need to consider the CN¥40m gain attributed to unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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, after all, that's exactly what the accounting terminology implies. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Orient International Enterprise.

Our Take On Orient International Enterprise's Profit Performance

Arguably, Orient International Enterprise's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Orient International Enterprise's statutory profits are better than its underlying earnings power. In further bad news, its earnings per share decreased in the last year. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example - Orient International Enterprise has 1 warning sign we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Orient International Enterprise'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. 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.