Xiamen R&T Plumbing TechnologyLtd's (SZSE:002790) Sluggish Earnings Might Be Just The Beginning Of Its Problems

Investors were disappointed by Xiamen R&T Plumbing Technology Co.,Ltd.'s (SZSE:002790 ) latest earnings release. We did some analysis, and found that there are some reasons to be cautious about the headline numbers.

Check out our latest analysis for Xiamen R&T Plumbing TechnologyLtd

The Impact Of Unusual Items On Profit

For anyone who wants to understand Xiamen R&T Plumbing TechnologyLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥13m worth of unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. 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. Which is hardly surprising, given the name. 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).

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 Xiamen R&T Plumbing TechnologyLtd's Profit Performance

We'd posit that Xiamen R&T Plumbing TechnologyLtd's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that Xiamen R&T Plumbing TechnologyLtd's true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 12% per annum growth in EPS for the last three. 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. If you'd like to know more about Xiamen R&T Plumbing TechnologyLtd as a business, it's important to be aware of any risks it's facing. At Simply Wall St, we found 2 warning signs for Xiamen R&T Plumbing TechnologyLtd and we think they deserve your attention.

This note has only looked at a single factor that sheds light on the nature of Xiamen R&T Plumbing 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.