Shiyan Taixiang Industry Co.,Ltd.'s (SZSE:301192) stock was strong despite it releasing a soft earnings report last week. Our analysis suggests that investors may have noticed some promising signs beyond the statutory profit figures.

How Do Unusual Items Influence Profit?

For anyone who wants to understand Shiyan Taixiang IndustryLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥4.0m due 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 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 Shiyan Taixiang IndustryLtd 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 Shiyan Taixiang IndustryLtd.

Our Take On Shiyan Taixiang IndustryLtd's Profit Performance

Unusual items (expenses) detracted from Shiyan Taixiang IndustryLtd's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Shiyan Taixiang IndustryLtd's statutory profit actually understates its earnings potential! Unfortunately, though, its earnings per share actually fell back over the last year. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For instance, we've identified 4 warning signs for Shiyan Taixiang IndustryLtd (2 are a bit concerning) you should be familiar with.

This note has only looked at a single factor that sheds light on the nature of Shiyan Taixiang IndustryLtd'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. 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.