Zhejiang Langdi Group (SHSE:603726) Posted Healthy Earnings But There Are Some Other Factors To Be Aware Of

Zhejiang Langdi Group Co., Ltd.'s (SHSE:603726) stock was strong after they recently reported robust earnings. 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 Zhejiang Langdi Group

How Do Unusual Items Influence Profit?

For anyone who wants to understand Zhejiang Langdi Group's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥20m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And, after all, that's exactly what the accounting terminology implies. If Zhejiang Langdi Group 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 Zhejiang Langdi Group.

Our Take On Zhejiang Langdi Group's Profit Performance

We'd posit that Zhejiang Langdi Group's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that Zhejiang Langdi Group's statutory profits are better than its underlying earnings power. The good news is that, its earnings per share increased by 72% 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 want to do dive deeper into Zhejiang Langdi Group, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 2 warning signs for Zhejiang Langdi Group you should know about.

Today we've zoomed in on a single data point to better understand the nature of Zhejiang Langdi Group'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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.