We Think That There Are Issues Underlying Ningbo Lehui International Engineering EquipmentLtd's (SHSE:603076) Earnings

Despite posting some strong earnings, the market for Ningbo Lehui International Engineering Equipment Co.,Ltd's (SHSE:603076) stock hasn't moved much. Our analysis suggests that this might be because shareholders have noticed some concerning underlying factors.

See our latest analysis for Ningbo Lehui International Engineering EquipmentLtd

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Ningbo Lehui International Engineering EquipmentLtd's profit received a boost of CN¥24m in unusual items, over the last year. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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. We can see that Ningbo Lehui International Engineering EquipmentLtd's positive unusual items were quite significant relative to its profit in the year to September 2024. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

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 Ningbo Lehui International Engineering EquipmentLtd's Profit Performance

As we discussed above, we think the significant positive unusual item makes Ningbo Lehui International Engineering EquipmentLtd's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Ningbo Lehui International Engineering EquipmentLtd's underlying earnings power is lower than its statutory profit. But the happy news is that, while acknowledging we have to look beyond the statutory numbers, those numbers are still improving, with EPS growing at a very high rate 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 if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Case in point: We've spotted 2 warning signs for Ningbo Lehui International Engineering EquipmentLtd you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Ningbo Lehui International Engineering EquipmentLtd's profit. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. 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.