We Think You Can Look Beyond Zheneng Jinjiang Environment Holding's (SGX:BWM) Lackluster Earnings

Shareholders appeared unconcerned with Zheneng Jinjiang Environment Holding Company Limited's (SGX:BWM) lackluster earnings report last week. Our analysis suggests that while the profits are soft, the foundations of the business are strong.

Check out our latest analysis for Zheneng Jinjiang Environment Holding

The Impact Of Unusual Items On Profit

To properly understand Zheneng Jinjiang Environment Holding's profit results, we need to consider the CN¥166m expense attributed to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Zheneng Jinjiang Environment Holding to produce a higher profit next year, all else being equal.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Zheneng Jinjiang Environment Holding.

Our Take On Zheneng Jinjiang Environment Holding's Profit Performance

Unusual items (expenses) detracted from Zheneng Jinjiang Environment Holding's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Zheneng Jinjiang Environment Holding's statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in 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. For example, Zheneng Jinjiang Environment Holding has 3 warning signs (and 1 which is concerning) we think you should know about.

This note has only looked at a single factor that sheds light on the nature of Zheneng Jinjiang Environment Holding'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. 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.