Unsurprisingly, Ganzhou Tengyuan Cobalt New Material Co., Ltd.'s (SZSE:301219) stock price was strong on the back of its healthy earnings report. We did some analysis and think that investors are missing some details hidden beneath the profit numbers.

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Ganzhou Tengyuan Cobalt New Material's profit received a boost of CN¥121m in unusual items, over the last year. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. 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).

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On Ganzhou Tengyuan Cobalt New Material's Profit Performance

Arguably, Ganzhou Tengyuan Cobalt New Material's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Ganzhou Tengyuan Cobalt New Material's true underlying earnings power is actually less than its statutory profit. The good news is that it earned a profit in the last twelve months, despite its previous loss. 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 Ganzhou Tengyuan Cobalt New Material as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 2 warning signs for Ganzhou Tengyuan Cobalt New Material you should know about.

This note has only looked at a single factor that sheds light on the nature of Ganzhou Tengyuan Cobalt New Material'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.