A lackluster earnings announcement from Yechiu Metal Recycling (China) Ltd. (SHSE:601388) 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 Yechiu Metal Recycling (China)
The Impact Of Unusual Items On Profit
Importantly, our data indicates that Yechiu Metal Recycling (China)'s profit received a boost of CN¥24m in unusual items, over the last year. 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 crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And, after all, that's exactly what the accounting terminology implies. If Yechiu Metal Recycling (China) 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 Yechiu Metal Recycling (China).
Our Take On Yechiu Metal Recycling (China)'s Profit Performance
We'd posit that Yechiu Metal Recycling (China)'s statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that Yechiu Metal Recycling (China)'s true underlying earnings power is actually less than its statutory profit. Sadly, its EPS was down over the last twelve months. 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. If you'd like to know more about Yechiu Metal Recycling (China) as a business, it's important to be aware of any risks it's facing. In terms of investment risks, we've identified 2 warning signs with Yechiu Metal Recycling (China), and understanding these should be part of your investment process.
Today we've zoomed in on a single data point to better understand the nature of Yechiu Metal Recycling (China)'s profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.