Solid Earnings May Not Tell The Whole Story For Hangzhou Zhongtai Cryogenic Technology (SZSE:300435)

The recent earnings posted by Hangzhou Zhongtai Cryogenic Technology Corporation (SZSE:300435) were solid, but the stock didn't move as much as we expected. We think this is due to investors looking beyond the statutory profits and being concerned with what they see.

View our latest analysis for Hangzhou Zhongtai Cryogenic Technology

The Impact Of Unusual Items On Profit

To properly understand Hangzhou Zhongtai Cryogenic Technology's profit results, we need to consider the CN¥30m gain attributed to 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 Hangzhou Zhongtai Cryogenic Technology 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 Hangzhou Zhongtai Cryogenic Technology's Profit Performance

Arguably, Hangzhou Zhongtai Cryogenic Technology's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Hangzhou Zhongtai Cryogenic Technology's true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 59% per annum growth in EPS for the last three. 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 while earnings quality is important, it's equally important to consider the risks facing Hangzhou Zhongtai Cryogenic Technology at this point in time. While conducting our analysis, we found that Hangzhou Zhongtai Cryogenic Technology has 1 warning sign and it would be unwise to ignore it.

This note has only looked at a single factor that sheds light on the nature of Hangzhou Zhongtai Cryogenic Technology's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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 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.