Hangzhou Turbine Power Group's (SZSE:200771) Earnings Are Weaker Than They Seem

Hangzhou Turbine Power Group Co., Ltd. (SZSE:200771) announced strong profits, but the stock was stagnant. Our analysis suggests that this might be because shareholders have noticed some concerning underlying factors.

View our latest analysis for Hangzhou Turbine Power Group

The Impact Of Unusual Items On Profit

For anyone who wants to understand Hangzhou Turbine Power Group's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥34m 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. 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 Hangzhou Turbine Power Group 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 Hangzhou Turbine Power Group.

Our Take On Hangzhou Turbine Power Group's Profit Performance

Arguably, Hangzhou Turbine Power Group's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Hangzhou Turbine Power Group's statutory profits are better than its underlying earnings power. The silver lining is that its EPS growth over the last year has been really wonderful, even if it's not a perfect measure. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Every company has risks, and we've spotted 1 warning sign for Hangzhou Turbine Power Group you should know about.

This note has only looked at a single factor that sheds light on the nature of Hangzhou Turbine Power Group'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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.

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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.