Jiangsu Xiehe ElectronicLtd's (SHSE:605258) Sluggish Earnings Might Be Just The Beginning Of Its Problems

The subdued market reaction suggests that Jiangsu Xiehe Electronic Co.,Ltd.'s (SHSE:605258) recent earnings didn't contain any surprises. However, we believe that investors should be aware of some underlying factors which may be of concern.

See our latest analysis for Jiangsu Xiehe ElectronicLtd

The Impact Of Unusual Items On Profit

To properly understand Jiangsu Xiehe ElectronicLtd's profit results, we need to consider the CN¥6.4m gain attributed to unusual items. 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. Which is hardly surprising, given the name. If Jiangsu Xiehe ElectronicLtd 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 Jiangsu Xiehe ElectronicLtd.

Our Take On Jiangsu Xiehe ElectronicLtd's Profit Performance

Arguably, Jiangsu Xiehe ElectronicLtd's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Jiangsu Xiehe ElectronicLtd's statutory profits are better than its underlying earnings power. Sadly, its EPS was down over the last twelve months. 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. If you'd like to know more about Jiangsu Xiehe ElectronicLtd as a business, it's important to be aware of any risks it's facing. For example, we've found that Jiangsu Xiehe ElectronicLtd has 3 warning signs (1 is a bit concerning!) that deserve your attention before going any further with your analysis.

This note has only looked at a single factor that sheds light on the nature of Jiangsu Xiehe ElectronicLtd'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. 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.