We Think That There Are More Issues For Xinjiang Lixin Energy (SZSE:001258) Than Just Sluggish Earnings

A lackluster earnings announcement from Xinjiang Lixin Energy Co., LTD. (SZSE:001258) last week didn't sink the stock price. However, we believe that investors should be aware of some underlying factors which may be of concern.

View our latest analysis for Xinjiang Lixin Energy

The Impact Of Unusual Items On Profit

For anyone who wants to understand Xinjiang Lixin Energy's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥24m 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. If Xinjiang Lixin Energy 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 Xinjiang Lixin Energy.

Our Take On Xinjiang Lixin Energy's Profit Performance

We'd posit that Xinjiang Lixin Energy'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 Xinjiang Lixin Energy'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 want to do dive deeper into Xinjiang Lixin Energy, you'd also look into what risks it is currently facing. Be aware that Xinjiang Lixin Energy is showing 3 warning signs in our investment analysis and 1 of those is a bit unpleasant...

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