Following the solid earnings report from Harbin Electric Corporation Jiamusi Electric Machine CO.,Ltd (SZSE:000922), the market responded by bidding up the stock price. Despite this, our analysis suggests that there are some factors weakening the foundations of those good profit numbers.
How Do Unusual Items Influence Profit?
To properly understand Harbin Electric Corporation Jiamusi Electric MachineLtd's profit results, we need to consider the CN¥95m gain attributed to unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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. 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 Harbin Electric Corporation Jiamusi Electric MachineLtd's Profit Performance
Arguably, Harbin Electric Corporation Jiamusi Electric MachineLtd's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Harbin Electric Corporation Jiamusi Electric MachineLtd's true underlying earnings power is actually less than its statutory profit. The good news is that, its earnings per share increased by 5.4% in the last year. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example - Harbin Electric Corporation Jiamusi Electric MachineLtd has 2 warning signs we think you should be aware of.
Today we've zoomed in on a single data point to better understand the nature of Harbin Electric Corporation Jiamusi Electric MachineLtd'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. 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.