Aeolus Tyre Co., Ltd. (SHSE:600469) recently posted some strong earnings, and the market responded positively. We did some digging and found some further encouraging factors that investors will like.
View our latest analysis for Aeolus Tyre
How Do Unusual Items Influence Profit?
For anyone who wants to understand Aeolus Tyre's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥61m 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 that's hardly a surprise given these line items are considered unusual. If Aeolus Tyre doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Aeolus Tyre.
Our Take On Aeolus Tyre's Profit Performance
Unusual items (expenses) detracted from Aeolus Tyre's earnings over the last year, but we might see an improvement next year. Because of this, we think Aeolus Tyre's earnings potential is at least as good as it seems, and maybe even better! And it's also positive that the company showed enough improvement to book a profit this year, after losing money 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 example - Aeolus Tyre has 1 warning sign we think you should be aware of.
Today we've zoomed in on a single data point to better understand the nature of Aeolus Tyre's profit. But there are plenty of other ways to inform your opinion of a company. 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.