Both Engineering TechnologyLtd's (SHSE:601133) Soft Earnings Don't Show The Whole Picture

Both Engineering Technology Co.,Ltd.'s (SHSE:601133) 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.

Check out our latest analysis for Both Engineering TechnologyLtd

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Both Engineering TechnologyLtd's profit was reduced by CN¥51m, due to unusual items, over the last year. 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. Assuming those unusual expenses don't come up again, we'd therefore expect Both Engineering TechnologyLtd to produce a higher profit next year, all else being equal.

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 Both Engineering TechnologyLtd's Profit Performance

Unusual items (expenses) detracted from Both Engineering TechnologyLtd's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Both Engineering TechnologyLtd's statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at 45% per year 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 Both Engineering TechnologyLtd as a business, it's important to be aware of any risks it's facing. You'd be interested to know, that we found 2 warning signs for Both Engineering TechnologyLtd and you'll want to know about these.

This note has only looked at a single factor that sheds light on the nature of Both Engineering TechnologyLtd'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.