The market for Shaanxi Beiyuan Chemical Industry Group Co., Ltd.'s (SHSE:601568) shares didn't move much after it posted weak earnings recently. We did some digging, and we believe the earnings are stronger than they seem.

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Shaanxi Beiyuan Chemical Industry Group's profit was reduced by CN¥492m, 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. In the twelve months to September 2024, Shaanxi Beiyuan Chemical Industry Group had a big unusual items expense. As a result, we can surmise that the unusual items made its statutory profit significantly weaker than it would otherwise be.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Shaanxi Beiyuan Chemical Industry Group.

Our Take On Shaanxi Beiyuan Chemical Industry Group's Profit Performance

As we mentioned previously, the Shaanxi Beiyuan Chemical Industry Group's profit was hampered by unusual items in the last year. Based on this observation, we consider it possible that Shaanxi Beiyuan Chemical Industry Group'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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Be aware that Shaanxi Beiyuan Chemical Industry Group is showing 4 warning signs in our investment analysis and 2 of those are significant...

This note has only looked at a single factor that sheds light on the nature of Shaanxi Beiyuan Chemical Industry Group'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 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.