Yongtaiyun Chemical LogisticsLtd's (SZSE:001228) Anemic Earnings Might Be Worse Than You Think

The market rallied behind Yongtaiyun Chemical Logistics Co.,Ltd's (SZSE:001228) stock, leading do a rise in the share price after its recent weak earnings report. Sometimes, shareholders are willing to ignore soft numbers with the hope that they will improve, but our analysis suggests this is unlikely for Yongtaiyun Chemical LogisticsLtd.

View our latest analysis for Yongtaiyun Chemical LogisticsLtd

The Impact Of Unusual Items On Profit

To properly understand Yongtaiyun Chemical LogisticsLtd's profit results, we need to consider the CN¥34m gain attributed to unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's as you'd expect, given these boosts are described as 'unusual'. 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).

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 Yongtaiyun Chemical LogisticsLtd's Profit Performance

We'd posit that Yongtaiyun Chemical LogisticsLtd's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that Yongtaiyun Chemical LogisticsLtd's statutory profits are better than its underlying earnings power. Nonetheless, it's still worth noting that its earnings per share have grown at 51% over the last three years. 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 Yongtaiyun Chemical LogisticsLtd at this point in time. At Simply Wall St, we found 1 warning sign for Yongtaiyun Chemical LogisticsLtd and we think they deserve your attention.

This note has only looked at a single factor that sheds light on the nature of Yongtaiyun Chemical LogisticsLtd's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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 that insiders are buying.

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.