Ningbo Orient Wires & CablesLtd's (SHSE:603606) Earnings Are Weaker Than They Seem

Ningbo Orient Wires & Cables Co.,Ltd. (SHSE:603606) just reported some strong earnings, and the market reacted accordingly with a healthy uplift in the share price. We did some analysis and think that investors are missing some details hidden beneath the profit numbers.

See our latest analysis for Ningbo Orient Wires & CablesLtd

How Do Unusual Items Influence Profit?

To properly understand Ningbo Orient Wires & CablesLtd's profit results, we need to consider the CN¥94m gain attributed to unusual items. 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. And, after all, that's exactly what the accounting terminology implies. If Ningbo Orient Wires & CablesLtd 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 Ningbo Orient Wires & CablesLtd's Profit Performance

Arguably, Ningbo Orient Wires & CablesLtd's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Ningbo Orient Wires & CablesLtd's statutory profits are better than its underlying earnings power. The good news is that, its earnings per share increased by 23% in the last year. 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. If you'd like to know more about Ningbo Orient Wires & CablesLtd as a business, it's important to be aware of any risks it's facing. For example - Ningbo Orient Wires & CablesLtd has 1 warning sign we think you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Ningbo Orient Wires & CablesLtd's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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. 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.