The market seemed underwhelmed by last week's earnings announcement from Shenyang Jinshan Energy Co., Ltd. (SHSE:600396) despite the healthy numbers. Our analysis suggests that shareholders might be missing some positive underlying factors in the earnings report.

View our latest analysis for Shenyang Jinshan Energy

The Impact Of Unusual Items On Profit

For anyone who wants to understand Shenyang Jinshan Energy's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥492m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. In the twelve months to September 2023, Shenyang Jinshan Energy had a big unusual items expense. All else being equal, this would likely have the effect of making the statutory profit look worse than its underlying earnings power.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Shenyang Jinshan Energy.

Our Take On Shenyang Jinshan Energy's Profit Performance

As we discussed above, we think the significant unusual expense will make Shenyang Jinshan Energy's statutory profit lower than it would otherwise have been. Because of this, we think Shenyang Jinshan Energy's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! And it's also positive that the company showed enough improvement to book a profit this year, after losing money last year. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. If you'd like to know more about Shenyang Jinshan Energy as a business, it's important to be aware of any risks it's facing. To help with this, we've discovered 2 warning signs (1 shouldn't be ignored!) that you ought to be aware of before buying any shares in Shenyang Jinshan Energy.

Today we've zoomed in on a single data point to better understand the nature of Shenyang Jinshan Energy'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.