Earnings Troubles May Signal Larger Issues for Nantong Haixing Electronics (SHSE:603115) Shareholders

Investors were disappointed by Nantong Haixing Electronics Co., Ltd.'s (SHSE:603115 ) latest earnings release. We did some analysis, and found that there are some reasons to be cautious about the headline numbers.

See our latest analysis for Nantong Haixing Electronics

The Impact Of Unusual Items On Profit

For anyone who wants to understand Nantong Haixing Electronics' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥21m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. Which is hardly surprising, given the name. If Nantong Haixing Electronics doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Nantong Haixing Electronics.

Our Take On Nantong Haixing Electronics' Profit Performance

Arguably, Nantong Haixing Electronics' statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Nantong Haixing Electronics' statutory profits are better than its underlying earnings power. Sadly, its EPS was down over the last twelve months. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. At Simply Wall St, we found 1 warning sign for Nantong Haixing Electronics and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of Nantong Haixing Electronics' 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 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.