Despite posting some strong earnings, the market for Zhejiang Int'l Group Co.,Ltd.'s (SZSE:000411) stock hasn't moved much. We did some digging, and we found some concerning factors in the details.
How Do Unusual Items Influence Profit?
To properly understand Zhejiang Int'l GroupLtd's profit results, we need to consider the CN¥88m gain attributed to unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. If Zhejiang Int'l GroupLtd doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Zhejiang Int'l GroupLtd.
Our Take On Zhejiang Int'l GroupLtd's Profit Performance
Arguably, Zhejiang Int'l GroupLtd's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Zhejiang Int'l GroupLtd's statutory profits are better than its underlying earnings power. But the good news is that its EPS growth over the last three years has been very impressive. 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 Zhejiang Int'l GroupLtd as a business, it's important to be aware of any risks it's facing. In terms of investment risks, we've identified 2 warning signs with Zhejiang Int'l GroupLtd, and understanding these should be part of your investment process.
Today we've zoomed in on a single data point to better understand the nature of Zhejiang Int'l GroupLtd'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. 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.