There May Be Underlying Issues With The Quality Of Keli Sensing Technology (Ningbo)Ltd's (SHSE:603662) Earnings

Keli Sensing Technology (Ningbo) Co.,Ltd. (SHSE:603662) announced strong profits, but the stock was stagnant. We did some digging, and we found some concerning factors in the details.

Check out our latest analysis for Keli Sensing Technology (Ningbo)Ltd

The Impact Of Unusual Items On Profit

For anyone who wants to understand Keli Sensing Technology (Ningbo)Ltd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥38m 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. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

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 Keli Sensing Technology (Ningbo)Ltd's Profit Performance

Arguably, Keli Sensing Technology (Ningbo)Ltd's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Keli Sensing Technology (Ningbo)Ltd's statutory profits are better than its underlying earnings power. Nonetheless, it's still worth noting that its earnings per share have grown at 9.2% over the last three years. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example - Keli Sensing Technology (Ningbo)Ltd 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 Keli Sensing Technology (Ningbo)Ltd'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. 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.