Shareholders appeared unconcerned with Tsaker New Energy Tech Co., Limited's (HKG:1986) lackluster earnings report last week. Our analysis suggests that while the profits are soft, the foundations of the business are strong.
How Do Unusual Items Influence Profit?
For anyone who wants to understand Tsaker New Energy Tech's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥29m due to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. If Tsaker New Energy Tech 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 Tsaker New Energy Tech.
Our Take On Tsaker New Energy Tech's Profit Performance
Because unusual items detracted from Tsaker New Energy Tech's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Tsaker New Energy Tech's statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in the last twelve months. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Case in point: We've spotted 5 warning signs for Tsaker New Energy Tech you should be mindful of and 2 of these are a bit unpleasant.
This note has only looked at a single factor that sheds light on the nature of Tsaker New Energy Tech's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. 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.