Cec Environmental ProtectionLtd's (SZSE:300172) Shareholders Have More To Worry About Than Only Soft Earnings

Simply Wall St ·  May 1, 2022 20:55

Cec Environmental Protection Co.,Ltd's (SZSE:300172) recent weak earnings report didn't cause a big stock movement. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

See our latest analysis for Cec Environmental ProtectionLtd

SZSE:300172 Earnings and Revenue History May 2nd 2022

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Cec Environmental ProtectionLtd's profit received a boost of CN¥35m in unusual items, over the last year. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And, after all, that's exactly what the accounting terminology implies. We can see that Cec Environmental ProtectionLtd's positive unusual items were quite significant relative to its profit in the year to March 2022. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger 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 Cec Environmental ProtectionLtd.

Our Take On Cec Environmental ProtectionLtd's Profit Performance

As we discussed above, we think the significant positive unusual item makes Cec Environmental ProtectionLtd's earnings a poor guide to its underlying profitability. For this reason, we think that Cec Environmental ProtectionLtd's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. Sadly, its EPS was down over the last twelve months. 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. While conducting our analysis, we found that Cec Environmental ProtectionLtd has 4 warning signs and it would be unwise to ignore them.

This note has only looked at a single factor that sheds light on the nature of Cec Environmental ProtectionLtd'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.

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