The market shrugged off Shiyan Taixiang Industry Co.,Ltd.'s (SZSE:301192) solid earnings report. Our analysis showed that there are some concerning factors in the earnings that investors may be cautious of.

The Impact Of Unusual Items On Profit

To properly understand Shiyan Taixiang IndustryLtd's profit results, we need to consider the CN¥3.7m gain attributed to unusual items. 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 analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's as you'd expect, given these boosts are described as 'unusual'. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

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

Arguably, Shiyan Taixiang IndustryLtd's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Shiyan Taixiang IndustryLtd's statutory profits are better than its underlying earnings power. The good news is that, its earnings per share increased by 36% in the 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 Shiyan Taixiang IndustryLtd as a business, it's important to be aware of any risks it's facing. For example, we've found that Shiyan Taixiang IndustryLtd has 2 warning signs (1 doesn't sit too well with us!) that deserve your attention before going any further with your analysis.

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