Jiangsu Rongtai Industry (SHSE:605133) Strong Profits May Be Masking Some Underlying Issues

The stock price didn't jump after Jiangsu Rongtai Industry Co., Ltd. (SHSE:605133) posted decent earnings last week. We think that investors might be worried about some concerning underlying factors.

See our latest analysis for Jiangsu Rongtai Industry

The Impact Of Unusual Items On Profit

To properly understand Jiangsu Rongtai Industry's profit results, we need to consider the CN¥20m gain attributed to unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. Which is hardly surprising, given the name. If Jiangsu Rongtai Industry 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 Jiangsu Rongtai Industry's Profit Performance

Arguably, Jiangsu Rongtai Industry's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Jiangsu Rongtai Industry's true underlying earnings power is actually less than its statutory profit. Nonetheless, it's still worth noting that its earnings per share have grown at 10% over the last three years. 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. If you'd like to know more about Jiangsu Rongtai Industry as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 1 warning sign for Jiangsu Rongtai Industry you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Jiangsu Rongtai Industry'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 with significant insider holdings to be useful.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.