Changzhou Tenglong AutoPartsCo.Ltd's (SHSE:603158) Strong Earnings Are Of Good Quality

Changzhou Tenglong AutoPartsCo.,Ltd. (SHSE:603158) just reported healthy earnings but the stock price didn't move much. We think that investors have missed some encouraging factors underlying the profit figures.

See our latest analysis for Changzhou Tenglong AutoPartsCo.Ltd

How Do Unusual Items Influence Profit?

For anyone who wants to understand Changzhou Tenglong AutoPartsCo.Ltd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥61m 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. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect Changzhou Tenglong AutoPartsCo.Ltd to produce a higher profit next year, all else being equal.

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 Changzhou Tenglong AutoPartsCo.Ltd's Profit Performance

Because unusual items detracted from Changzhou Tenglong AutoPartsCo.Ltd's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Changzhou Tenglong AutoPartsCo.Ltd's earnings potential is at least as good as it seems, and maybe even better! And on top of that, its earnings per share increased by 61% 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. You'd be interested to know, that we found 1 warning sign for Changzhou Tenglong AutoPartsCo.Ltd and you'll want to know about it.

Today we've zoomed in on a single data point to better understand the nature of Changzhou Tenglong AutoPartsCo.Ltd'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. 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.