Concerns Surrounding Huada Automotive TechnologyLtd's (SHSE:603358) Performance

The recent earnings posted by Huada Automotive Technology Corp.,Ltd (SHSE:603358) were solid, but the stock didn't move as much as we expected. We think this is due to investors looking beyond the statutory profits and being concerned with what they see.

View our latest analysis for Huada Automotive TechnologyLtd

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Huada Automotive TechnologyLtd's profit received a boost of CN¥37m in unusual items, over the last year. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. 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 Huada Automotive TechnologyLtd doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

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 Huada Automotive TechnologyLtd's Profit Performance

We'd posit that Huada Automotive TechnologyLtd's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that Huada Automotive TechnologyLtd's statutory profits are better than its underlying earnings power. The good news is that, its earnings per share increased by 17% 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. If you'd like to know more about Huada Automotive TechnologyLtd as a business, it's important to be aware of any risks it's facing. For example - Huada Automotive TechnologyLtd has 1 warning sign we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Huada Automotive TechnologyLtd'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 with high insider ownership.

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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.