Aotecar New Energy Technology's (SZSE:002239) Soft Earnings Are Actually Better Than They Appear

Aotecar New Energy Technology Co., Ltd.'s (SZSE:002239) recent soft profit numbers didn't appear to worry shareholders, as the stock price showed strength. However, we think the company is showing some signs that things are more promising than they seem.

View our latest analysis for Aotecar New Energy Technology

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Aotecar New Energy Technology's profit was reduced by CN¥77m, due to unusual items, over the last year. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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. Assuming those unusual expenses don't come up again, we'd therefore expect Aotecar New Energy Technology to produce a higher profit next year, all else being equal.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Aotecar New Energy Technology.

Our Take On Aotecar New Energy Technology's Profit Performance

Unusual items (expenses) detracted from Aotecar New Energy Technology's earnings over the last year, but we might see an improvement next year. Because of this, we think Aotecar New Energy Technology's earnings potential is at least as good as it seems, and maybe even better! Unfortunately, though, its earnings per share actually fell back 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 if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. At Simply Wall St, we found 1 warning sign for Aotecar New Energy Technology and we think they deserve your attention.

This note has only looked at a single factor that sheds light on the nature of Aotecar New Energy Technology's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. 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.