Shareholders Can Be Confident That Ningbo Lehui International Engineering EquipmentLtd's (SHSE:603076) Earnings Are High Quality

Even though Ningbo Lehui International Engineering Equipment Co.,Ltd's (SHSE:603076) recent earnings release was robust, the market didn't seem to notice. Our analysis suggests that investors might be missing some promising details.

See our latest analysis for Ningbo Lehui International Engineering EquipmentLtd

How Do Unusual Items Influence Profit?

To properly understand Ningbo Lehui International Engineering EquipmentLtd's profit results, we need to consider the CN¥31m expense attributed 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. Ningbo Lehui International Engineering EquipmentLtd 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 Ningbo Lehui International Engineering EquipmentLtd.

Our Take On Ningbo Lehui International Engineering EquipmentLtd's Profit Performance

As we discussed above, we think the significant unusual expense will make Ningbo Lehui International Engineering EquipmentLtd's statutory profit lower than it would otherwise have been. Because of this, we think Ningbo Lehui International Engineering EquipmentLtd's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! And the EPS is up 60% over the last twelve months. 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 while earnings quality is important, it's equally important to consider the risks facing Ningbo Lehui International Engineering EquipmentLtd at this point in time. Be aware that Ningbo Lehui International Engineering EquipmentLtd is showing 2 warning signs in our investment analysis and 1 of those is a bit concerning...

Today we've zoomed in on a single data point to better understand the nature of Ningbo Lehui International Engineering EquipmentLtd'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. 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 that insiders are buying 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.