Henan Thinker Automatic EquipmentLtd's (SHSE:603508) Solid Profits Have Weak Fundamentals

Henan Thinker Automatic Equipment Co.,Ltd. (SHSE:603508) just reported some strong earnings, and the market reacted accordingly with a healthy uplift in the share price. However, our analysis suggests that shareholders may be missing some factors that indicate the earnings result was not as good as it looked.

Check out our latest analysis for Henan Thinker Automatic EquipmentLtd

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Henan Thinker Automatic EquipmentLtd's profit received a boost of CN¥55m in unusual items, over the last year. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. 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 Henan Thinker Automatic EquipmentLtd doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

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 Henan Thinker Automatic EquipmentLtd's Profit Performance

Arguably, Henan Thinker Automatic EquipmentLtd's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Henan Thinker Automatic EquipmentLtd's true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 13% EPS growth in 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. If you want to do dive deeper into Henan Thinker Automatic EquipmentLtd, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 2 warning signs for Henan Thinker Automatic EquipmentLtd and you'll want to know about these.

Today we've zoomed in on a single data point to better understand the nature of Henan Thinker Automatic EquipmentLtd's profit. But there are plenty of other ways to inform your opinion of a company. 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.