Zhejiang Founder Motor's (SZSE:002196) Strong Earnings Are Of Good Quality

Zhejiang Founder Motor Co., Ltd. (SZSE:002196) just reported healthy earnings but the stock price didn't move much. Our analysis suggests that investors might be missing some promising details.

Check out our latest analysis for Zhejiang Founder Motor

The Impact Of Unusual Items On Profit

For anyone who wants to understand Zhejiang Founder Motor's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥34m 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. 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 Founder Motor 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 Founder Motor.

Our Take On Zhejiang Founder Motor's Profit Performance

Because unusual items detracted from Zhejiang Founder Motor'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 Zhejiang Founder Motor's earnings potential is at least as good as it seems, and maybe even better! And it's also positive that the company showed enough improvement to book a profit this year, after losing money 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. You'd be interested to know, that we found 2 warning signs for Zhejiang Founder Motor and you'll want to know about these bad boys.

Today we've zoomed in on a single data point to better understand the nature of Zhejiang Founder Motor's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.