We Think You Should Be Aware Of Some Concerning Factors In Yanchang Petroleum International's (HKG:346) Earnings

The recent earnings posted by Yanchang Petroleum International Limited (HKG:346) were solid, but the stock didn't move as much as we expected. We believe that shareholders have noticed some concerning factors beyond the statutory profit numbers.

See our latest analysis for Yanchang Petroleum International

How Do Unusual Items Influence Profit?

For anyone who wants to understand Yanchang Petroleum International's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from HK$766m 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. Yanchang Petroleum International had a rather significant contribution from unusual items relative to its profit to December 2023. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Yanchang Petroleum International.

Our Take On Yanchang Petroleum International's Profit Performance

As we discussed above, we think the significant positive unusual item makes Yanchang Petroleum International's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Yanchang Petroleum International's underlying earnings power is lower than its statutory profit. The good news is that it earned a profit in the last twelve months, despite its previous loss. 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 Yanchang Petroleum International at this point in time. You'd be interested to know, that we found 3 warning signs for Yanchang Petroleum International and you'll want to know about them.

Today we've zoomed in on a single data point to better understand the nature of Yanchang Petroleum International'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. 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.