Zhejiang Yuejian Intelligent EquipmentLtd's (SHSE:603095) Soft Earnings Are Actually Better Than They Appear

Zhejiang Yuejian Intelligent Equipment Co.,Ltd.'s (SHSE:603095) recent soft profit numbers didn't appear to worry shareholders, as the stock price showed strength. Our analysis suggests that investors may have noticed some promising signs beyond the statutory profit figures.

Check out our latest analysis for Zhejiang Yuejian Intelligent EquipmentLtd

How Do Unusual Items Influence Profit?

For anyone who wants to understand Zhejiang Yuejian Intelligent EquipmentLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥17m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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. Assuming those unusual expenses don't come up again, we'd therefore expect Zhejiang Yuejian Intelligent EquipmentLtd 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 Zhejiang Yuejian Intelligent EquipmentLtd.

Our Take On Zhejiang Yuejian Intelligent EquipmentLtd's Profit Performance

Unusual items (expenses) detracted from Zhejiang Yuejian Intelligent EquipmentLtd's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Zhejiang Yuejian Intelligent EquipmentLtd's statutory profit actually understates its earnings potential! Unfortunately, though, its earnings per share actually fell back over the last year. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Our analysis shows 4 warning signs for Zhejiang Yuejian Intelligent EquipmentLtd (1 is concerning!) and we strongly recommend you look at these bad boys before investing.

This note has only looked at a single factor that sheds light on the nature of Zhejiang Yuejian Intelligent 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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.