We Think That There Are More Issues For Leshan Electric PowerLtd (SHSE:600644) Than Just Sluggish Earnings

Leshan Electric Power Co.,Ltd's (SHSE:600644) recent weak earnings report didn't cause a big stock movement. We think that investors are worried about some weaknesses underlying the earnings.

View our latest analysis for Leshan Electric PowerLtd

The Impact Of Unusual Items On Profit

For anyone who wants to understand Leshan Electric PowerLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥6.8m worth of 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. Which is hardly surprising, given the name. 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 Leshan Electric PowerLtd.

Our Take On Leshan Electric PowerLtd's Profit Performance

Arguably, Leshan Electric PowerLtd's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Leshan Electric PowerLtd'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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Every company has risks, and we've spotted 1 warning sign for Leshan Electric PowerLtd you should know about.

This note has only looked at a single factor that sheds light on the nature of Leshan Electric PowerLtd'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 with significant insider holdings 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.