Solid Earnings Reflect Zhejiang Liming Intelligent ManufacturingLtd's (SHSE:603048) Strength As A Business

The subdued stock price reaction suggests that Zhejiang Liming Intelligent Manufacturing Co.,Ltd.'s (SHSE:603048) strong earnings didn't offer any surprises. Our analysis suggests that investors might be missing some promising details.

View our latest analysis for Zhejiang Liming Intelligent ManufacturingLtd

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Zhejiang Liming Intelligent ManufacturingLtd's profit was reduced by CN¥22m, due to unusual items, over the last year. 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 that's hardly a surprise given these line items are considered unusual. If Zhejiang Liming Intelligent ManufacturingLtd 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 Zhejiang Liming Intelligent ManufacturingLtd.

Our Take On Zhejiang Liming Intelligent ManufacturingLtd's Profit Performance

Unusual items (expenses) detracted from Zhejiang Liming Intelligent ManufacturingLtd's earnings over the last year, but we might see an improvement next year. Because of this, we think Zhejiang Liming Intelligent ManufacturingLtd's earnings potential is at least as good as it seems, and maybe even better! Furthermore, it has done a great job growing EPS over the last year. 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 while earnings quality is important, it's equally important to consider the risks facing Zhejiang Liming Intelligent ManufacturingLtd at this point in time. Every company has risks, and we've spotted 3 warning signs for Zhejiang Liming Intelligent ManufacturingLtd (of which 2 don't sit too well with us!) you should know about.

Today we've zoomed in on a single data point to better understand the nature of Zhejiang Liming Intelligent ManufacturingLtd's profit. But there are plenty of other ways to inform your opinion of a company. 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.