Shaanxi Zhongtian Rocket Technology's (SZSE:003009) Sluggish Earnings Might Be Just The Beginning Of Its Problems

The market rallied behind Shaanxi Zhongtian Rocket Technology Co., Ltd's (SZSE:003009) stock, leading do a rise in the share price after its recent weak earnings report. While shareholders may be willing to overlook soft profit numbers, we believe that they should also be taking into account some other factors which may be cause for concern.

View our latest analysis for Shaanxi Zhongtian Rocket Technology

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Shaanxi Zhongtian Rocket Technology's profit received a boost of CN¥8.8m 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. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. Which is hardly surprising, given the name. If Shaanxi Zhongtian Rocket Technology 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 Shaanxi Zhongtian Rocket Technology.

Our Take On Shaanxi Zhongtian Rocket Technology's Profit Performance

Arguably, Shaanxi Zhongtian Rocket Technology's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Shaanxi Zhongtian Rocket Technology's statutory profits are better than its underlying earnings power. In further bad news, its earnings per share decreased in the last year. 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. 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. You'd be interested to know, that we found 1 warning sign for Shaanxi Zhongtian Rocket Technology and you'll want to know about it.

This note has only looked at a single factor that sheds light on the nature of Shaanxi Zhongtian Rocket Technology'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 that insiders are buying 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.