Even though SINOPEC Shandong Taishan Pectroleum Co., Ltd.'s (SZSE:000554) recent earnings release was robust, the market didn't seem to notice. We think that investors have missed some encouraging factors underlying the profit figures.
How Do Unusual Items Influence Profit?
Importantly, our data indicates that SINOPEC Shandong Taishan Pectroleum's profit was reduced by CN¥16m, due to unusual items, over the last year. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect SINOPEC Shandong Taishan Pectroleum 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 SINOPEC Shandong Taishan Pectroleum.
Our Take On SINOPEC Shandong Taishan Pectroleum's Profit Performance
Unusual items (expenses) detracted from SINOPEC Shandong Taishan Pectroleum's earnings over the last year, but we might see an improvement next year. Because of this, we think SINOPEC Shandong Taishan Pectroleum's earnings potential is at least as good as it seems, and maybe even better! Better yet, its EPS are growing strongly, which is nice to see. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. At Simply Wall St, we found 1 warning sign for SINOPEC Shandong Taishan Pectroleum and we think they deserve your attention.
This note has only looked at a single factor that sheds light on the nature of SINOPEC Shandong Taishan Pectroleum'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. 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.