XTC New Energy Materials(Xiamen)Ltd's (SHSE:688778) Weak Earnings May Only Reveal A Part Of The Whole Picture

A lackluster earnings announcement from XTC New Energy Materials(Xiamen) Co.,Ltd. (SHSE:688778) last week didn't sink the stock price. However, we believe that investors should be aware of some underlying factors which may be of concern.

View our latest analysis for XTC New Energy Materials(Xiamen)Ltd

The Impact Of Unusual Items On Profit

Importantly, our data indicates that XTC New Energy Materials(Xiamen)Ltd's profit received a boost of CN¥115m 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. 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. XTC New Energy Materials(Xiamen)Ltd had a rather significant contribution from unusual items relative to its profit to September 2024. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

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 XTC New Energy Materials(Xiamen)Ltd's Profit Performance

As we discussed above, we think the significant positive unusual item makes XTC New Energy Materials(Xiamen)Ltd's earnings a poor guide to its underlying profitability. For this reason, we think that XTC New Energy Materials(Xiamen)Ltd's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. Sadly, its EPS was down over the last twelve months. 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. For example - XTC New Energy Materials(Xiamen)Ltd has 2 warning signs we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of XTC New Energy Materials(Xiamen)Ltd'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 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.