Nanfang Zhongjin Environment's (SZSE:300145) Profits Appear To Have Quality Issues

Nanfang Zhongjin Environment Co., Ltd.'s (SZSE:300145) robust recent earnings didn't do much to move the stock. However the statutory profit number doesn't tell the whole story, and we have found some factors which might be of concern to shareholders.

Check out our latest analysis for Nanfang Zhongjin Environment

How Do Unusual Items Influence Profit?

For anyone who wants to understand Nanfang Zhongjin Environment's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥75m 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. We can see that Nanfang Zhongjin Environment's positive unusual items were quite significant relative to its profit in the year to September 2024. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

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 Nanfang Zhongjin Environment's Profit Performance

As we discussed above, we think the significant positive unusual item makes Nanfang Zhongjin Environment's earnings a poor guide to its underlying profitability. For this reason, we think that Nanfang Zhongjin Environment's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. The good news is that, its earnings per share increased by 14% in the last year. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. At Simply Wall St, we found 1 warning sign for Nanfang Zhongjin Environment and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of Nanfang Zhongjin Environment's profit. But there are plenty of other ways to inform your opinion of a company. 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.