Top Resource Energy's (SZSE:300332) Conservative Accounting Might Explain Soft Earnings

The market for Top Resource Energy Co., Ltd.'s (SZSE:300332) shares didn't move much after it posted weak earnings recently. We think that the softer headline numbers might be getting counterbalanced by some positive underlying factors.

View our latest analysis for Top Resource Energy

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Top Resource Energy's profit was reduced by CN¥66m, due to unusual items, over the last year. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Top Resource Energy to produce a higher profit next year, all else being equal.

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 Top Resource Energy's Profit Performance

Because unusual items detracted from Top Resource Energy's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Top Resource Energy's earnings potential is at least as good as it seems, and maybe even better! And on top of that, its earnings per share have grown at 47% per year over the last three years. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. While conducting our analysis, we found that Top Resource Energy has 3 warning signs and it would be unwise to ignore these.

This note has only looked at a single factor that sheds light on the nature of Top Resource 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. 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.