Impressive Earnings May Not Tell The Whole Story For Ningbo CixingLtd (SZSE:300307)

Investors were disappointed with Ningbo Cixing Co.,Ltd.'s (SZSE:300307) earnings, despite the strong profit numbers. We think that the market might be paying attention to some underlying factors that they find to be concerning.

See our latest analysis for Ningbo CixingLtd

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Ningbo CixingLtd's profit received a boost of CN¥13m 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. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. 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).

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Ningbo CixingLtd.

Our Take On Ningbo CixingLtd's Profit Performance

Arguably, Ningbo CixingLtd's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Ningbo CixingLtd's statutory profits are better than its underlying earnings power. The good news is that, its earnings per share increased by 26% 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. While earnings are important, another area to consider is the balance sheet. If you're interested we have a graphic representation of Ningbo CixingLtd's balance sheet.

This note has only looked at a single factor that sheds light on the nature of Ningbo CixingLtd'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 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.