Investors Can Find Comfort In Zhongjie (Jiangsu) TechnologyLtd's (SZSE:301072) Earnings Quality

Zhongjie (Jiangsu) Technology Co.,Ltd.'s (SZSE:301072) recent soft profit numbers didn't appear to worry shareholders, as the stock price showed strength. We think that investors might be looking at some positive factors beyond the earnings numbers.

Check out our latest analysis for Zhongjie (Jiangsu) TechnologyLtd

How Do Unusual Items Influence Profit?

For anyone who wants to understand Zhongjie (Jiangsu) TechnologyLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥12m 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. Zhongjie (Jiangsu) TechnologyLtd took a rather significant hit from unusual items in the year to March 2024. All else being equal, this would likely have the effect of making the statutory profit look worse than its underlying earnings power.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Zhongjie (Jiangsu) TechnologyLtd.

Our Take On Zhongjie (Jiangsu) TechnologyLtd's Profit Performance

As we mentioned previously, the Zhongjie (Jiangsu) TechnologyLtd's profit was hampered by unusual items in the last year. Because of this, we think Zhongjie (Jiangsu) TechnologyLtd's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! Unfortunately, though, its earnings per share actually fell back over the last year. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. So while earnings quality is important, it's equally important to consider the risks facing Zhongjie (Jiangsu) TechnologyLtd at this point in time. Be aware that Zhongjie (Jiangsu) TechnologyLtd is showing 4 warning signs in our investment analysis and 2 of those are concerning...

Today we've zoomed in on a single data point to better understand the nature of Zhongjie (Jiangsu) TechnologyLtd'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.