Investors Can Find Comfort In Ningbo United GroupLtd's (SHSE:600051) Earnings Quality

Shareholders appeared unconcerned with Ningbo United Group Co.,Ltd.'s (SHSE:600051) lackluster earnings report last week. We think that the softer headline numbers might be getting counterbalanced by some positive underlying factors.

View our latest analysis for Ningbo United GroupLtd

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Ningbo United GroupLtd's profit was reduced by CN¥19m, 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. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect Ningbo United GroupLtd 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 Ningbo United GroupLtd.

Our Take On Ningbo United GroupLtd's Profit Performance

Unusual items (expenses) detracted from Ningbo United GroupLtd's earnings over the last year, but we might see an improvement next year. Because of this, we think Ningbo United GroupLtd's earnings potential is at least as good as it seems, and maybe even better! And the EPS is up 15% annually, over the last three years. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Every company has risks, and we've spotted 2 warning signs for Ningbo United GroupLtd (of which 1 is a bit concerning!) you should know about.

This note has only looked at a single factor that sheds light on the nature of Ningbo United GroupLtd'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. 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.

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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.