Jiangsu Tongguang Electronic Wire & Cable's (SZSE:300265) Weak Earnings May Only Reveal A Part Of The Whole Picture

Jiangsu Tongguang Electronic Wire & Cable Co., Ltd.'s (SZSE:300265) recent weak earnings report didn't cause a big stock movement. We think that investors are worried about some weaknesses underlying the earnings.

View our latest analysis for Jiangsu Tongguang Electronic Wire & Cable

The Impact Of Unusual Items On Profit

To properly understand Jiangsu Tongguang Electronic Wire & Cable's profit results, we need to consider the CN¥9.0m gain attributed to 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. And, after all, that's exactly what the accounting terminology implies. If Jiangsu Tongguang Electronic Wire & Cable 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 Jiangsu Tongguang Electronic Wire & Cable.

Our Take On Jiangsu Tongguang Electronic Wire & Cable's Profit Performance

Arguably, Jiangsu Tongguang Electronic Wire & Cable's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Jiangsu Tongguang Electronic Wire & Cable's true underlying earnings power is actually less than its statutory profit. In further bad news, its earnings per share decreased 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. If you want to do dive deeper into Jiangsu Tongguang Electronic Wire & Cable, you'd also look into what risks it is currently facing. For example, we've discovered 3 warning signs that you should run your eye over to get a better picture of Jiangsu Tongguang Electronic Wire & Cable.

Today we've zoomed in on a single data point to better understand the nature of Jiangsu Tongguang Electronic Wire & Cable'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 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.