Luoyang Northglass TechnologyLtd's (SZSE:002613) Sluggish Earnings Might Be Just The Beginning Of Its Problems

Luoyang Northglass Technology Co.,Ltd's (SZSE:002613) recent weak earnings report didn't cause a big stock movement. We think that investors are worried about some weaknesses underlying the earnings.

Check out our latest analysis for Luoyang Northglass TechnologyLtd

The Impact Of Unusual Items On Profit

For anyone who wants to understand Luoyang Northglass TechnologyLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥7.7m worth of unusual items. 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 analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Luoyang Northglass TechnologyLtd.

Our Take On Luoyang Northglass TechnologyLtd's Profit Performance

Arguably, Luoyang Northglass TechnologyLtd's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Luoyang Northglass TechnologyLtd's true underlying earnings power is actually less than its statutory profit. Sadly, its EPS was down over the last twelve months. 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. So while earnings quality is important, it's equally important to consider the risks facing Luoyang Northglass TechnologyLtd at this point in time. You'd be interested to know, that we found 1 warning sign for Luoyang Northglass 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 Luoyang Northglass TechnologyLtd'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.