The recent earnings posted by Zhe Jiang Taihua New Material Co., Ltd. (SHSE:603055) were solid, but the stock didn't move as much as we expected. We believe that shareholders have noticed some concerning factors beyond the statutory profit numbers.
See our latest analysis for Zhe Jiang Taihua New Material
SHSE:603055 Earnings and Revenue History August 26th 2022How Do Unusual Items Influence Profit?
Importantly, our data indicates that Zhe Jiang Taihua New Material's profit received a boost of CN¥98m 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 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. And, after all, that's exactly what the accounting terminology implies. If Zhe Jiang Taihua New Material doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.
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 Zhe Jiang Taihua New Material's Profit Performance
Arguably, Zhe Jiang Taihua New Material's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Zhe Jiang Taihua New Material's true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 55% per annum growth in EPS for the last three. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. At Simply Wall St, we found 4 warning signs for Zhe Jiang Taihua New Material and we think they deserve your attention.
Today we've zoomed in on a single data point to better understand the nature of Zhe Jiang Taihua New Material'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 that insiders are buying 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.