Zhejiang Tengen ElectricsLtd (SHSE:605066) Posted Healthy Earnings But There Are Some Other Factors To Be Aware Of

Zhejiang Tengen Electrics Co.,Ltd.'s (SHSE:605066) robust earnings report didn't manage to move the market for its stock. Our analysis suggests that shareholders have noticed something concerning in the numbers.

Check out our latest analysis for Zhejiang Tengen ElectricsLtd

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Zhejiang Tengen ElectricsLtd's profit received a boost of CN¥22m 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 that's as you'd expect, given these boosts are described as 'unusual'. If Zhejiang Tengen ElectricsLtd 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 Tengen ElectricsLtd.

Our Take On Zhejiang Tengen ElectricsLtd's Profit Performance

We'd posit that Zhejiang Tengen ElectricsLtd'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 Tengen ElectricsLtd's statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 15% EPS growth 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. If you want to do dive deeper into Zhejiang Tengen ElectricsLtd, you'd also look into what risks it is currently facing. For instance, we've identified 2 warning signs for Zhejiang Tengen ElectricsLtd (1 doesn't sit too well with us) you should be familiar with.

This note has only looked at a single factor that sheds light on the nature of Zhejiang Tengen ElectricsLtd'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.