Zhongzhong Science & Technology (Tianjin)'s (SHSE:603135) Anemic Earnings Might Be Worse Than You Think

The subdued market reaction suggests that Zhongzhong Science & Technology (Tianjin) Co., Ltd.'s (SHSE:603135) recent earnings didn't contain any surprises. However, we believe that investors should be aware of some underlying factors which may be of concern.

View our latest analysis for Zhongzhong Science & Technology (Tianjin)

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Zhongzhong Science & Technology (Tianjin)'s profit received a boost of CN¥21m in unusual items, over the last year. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. 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. And, after all, that's exactly what the accounting terminology implies. If Zhongzhong Science & Technology (Tianjin) 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 Zhongzhong Science & Technology (Tianjin).

Our Take On Zhongzhong Science & Technology (Tianjin)'s Profit Performance

Arguably, Zhongzhong Science & Technology (Tianjin)'s statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Zhongzhong Science & Technology (Tianjin)'s statutory profits are better than its underlying earnings power. In further bad news, its earnings per share decreased in 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. While conducting our analysis, we found that Zhongzhong Science & Technology (Tianjin) has 1 warning sign and it would be unwise to ignore it.

This note has only looked at a single factor that sheds light on the nature of Zhongzhong Science & Technology (Tianjin)'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.