Weak Statutory Earnings May Not Tell The Whole Story For Fujian Nanping Sun Cable (SZSE:002300)

Fujian Nanping Sun Cable Co., Ltd.'s (SZSE:002300) recent weak earnings report didn't cause a big stock movement. We think that investors are worried about some weaknesses underlying the earnings.

See our latest analysis for Fujian Nanping Sun Cable

The Impact Of Unusual Items On Profit

For anyone who wants to understand Fujian Nanping Sun Cable's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥23m 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. And that's as you'd expect, given these boosts are described as 'unusual'. If Fujian Nanping Sun Cable 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 Fujian Nanping Sun Cable.

Our Take On Fujian Nanping Sun Cable's Profit Performance

We'd posit that Fujian Nanping Sun Cable'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 Fujian Nanping Sun Cable's statutory profits are better than its underlying earnings power. 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. So while earnings quality is important, it's equally important to consider the risks facing Fujian Nanping Sun Cable at this point in time. Case in point: We've spotted 3 warning signs for Fujian Nanping Sun Cable you should be mindful of and 1 of these is a bit concerning.

Today we've zoomed in on a single data point to better understand the nature of Fujian Nanping Sun Cable'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. 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.