We Think That There Are Some Issues For Hebei Yichen Industrial Group (HKG:1596) Beyond Its Promising Earnings

The recent earnings posted by Hebei Yichen Industrial Group Corporation Limited (HKG:1596) were solid, but the stock didn't move as much as we expected. We think this is due to investors looking beyond the statutory profits and being concerned with what they see.

Check out our latest analysis for Hebei Yichen Industrial Group

How Do Unusual Items Influence Profit?

For anyone who wants to understand Hebei Yichen Industrial Group's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥28m worth of 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. Which is hardly surprising, given the name. If Hebei Yichen Industrial Group 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 Hebei Yichen Industrial Group.

Our Take On Hebei Yichen Industrial Group's Profit Performance

We'd posit that Hebei Yichen Industrial Group'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 Hebei Yichen Industrial Group's statutory profits are better than its underlying earnings power. Nonetheless, it's still worth noting that its earnings per share have grown at 43% over the last three years. 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 Hebei Yichen Industrial Group as a business, it's important to be aware of any risks it's facing. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Hebei Yichen Industrial Group.

Today we've zoomed in on a single data point to better understand the nature of Hebei Yichen Industrial Group's profit. But there are plenty of other ways to inform your opinion of a company. 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. 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.
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