Zhejiang Yonggui Electric Equipment's (SZSE:300351) Shareholders Have More To Worry About Than Only Soft Earnings

Zhejiang Yonggui Electric Equipment Co., Ltd.'s (SZSE:300351) recent weak earnings report didn't cause a big stock movement. We think that investors are worried about some weaknesses underlying the earnings.

See our latest analysis for Zhejiang Yonggui Electric Equipment

How Do Unusual Items Influence Profit?

For anyone who wants to understand Zhejiang Yonggui Electric Equipment's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥6.1m worth of unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. 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 that's as you'd expect, given these boosts are described as 'unusual'. If Zhejiang Yonggui Electric Equipment doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

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 Zhejiang Yonggui Electric Equipment's Profit Performance

Arguably, Zhejiang Yonggui Electric Equipment's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Zhejiang Yonggui Electric Equipment's statutory profits are better than its underlying earnings power. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. At Simply Wall St, we found 1 warning sign for Zhejiang Yonggui Electric Equipment and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of Zhejiang Yonggui Electric Equipment'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 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.