Moon Environment TechnologyLtd's (SZSE:000811) Anemic Earnings Might Be Worse Than You Think

The subdued market reaction suggests that Moon Environment Technology Co.,Ltd.'s (SZSE:000811) recent earnings didn't contain any surprises. However, we believe that investors should be aware of some underlying factors which may be of concern.

See our latest analysis for Moon Environment TechnologyLtd

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Moon Environment TechnologyLtd's profit received a boost of CN¥49m in unusual items, over the last year. 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 Moon Environment TechnologyLtd 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 Moon Environment TechnologyLtd's Profit Performance

We'd posit that Moon Environment TechnologyLtd'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 Moon Environment TechnologyLtd's statutory profits are better than its underlying earnings power. But the good news is that its EPS growth over the last three years has been very impressive. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. So while earnings quality is important, it's equally important to consider the risks facing Moon Environment TechnologyLtd at this point in time. You'd be interested to know, that we found 1 warning sign for Moon Environment TechnologyLtd and you'll want to know about it.

This note has only looked at a single factor that sheds light on the nature of Moon Environment TechnologyLtd'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 with significant insider holdings 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.