The recent earnings posted by Y.U.D.Yangtze River Investment Industry Co.,Ltd. (SHSE:600119) were solid, but the stock didn't move as much as we expected. We think this is due to investors looking beyond the statutory profits and being concerned with what they see.
How Do Unusual Items Influence Profit?
For anyone who wants to understand Y.U.D.Yangtze River Investment IndustryLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥29m worth of 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 crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. Which is hardly surprising, given the name. We can see that Y.U.D.Yangtze River Investment IndustryLtd's positive unusual items were quite significant relative to its profit in the year to March 2024. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Y.U.D.Yangtze River Investment IndustryLtd.
Our Take On Y.U.D.Yangtze River Investment IndustryLtd's Profit Performance
As we discussed above, we think the significant positive unusual item makes Y.U.D.Yangtze River Investment IndustryLtd's earnings a poor guide to its underlying profitability. For this reason, we think that Y.U.D.Yangtze River Investment IndustryLtd's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. On the bright side, the company showed enough improvement to book a profit this year, after losing money last year. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. If you'd like to know more about Y.U.D.Yangtze River Investment IndustryLtd as a business, it's important to be aware of any risks it's facing. In terms of investment risks, we've identified 1 warning sign with Y.U.D.Yangtze River Investment IndustryLtd, and understanding this should be part of your investment process.
Today we've zoomed in on a single data point to better understand the nature of Y.U.D.Yangtze River Investment 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. 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.