Jiangsu Newamstar Packaging MachineryLtd's (SZSE:300509) Conservative Accounting Might Explain Soft Earnings

Jiangsu Newamstar Packaging Machinery Co.,Ltd's (SZSE:300509) recent soft profit numbers didn't appear to worry shareholders, as the stock price showed strength. Our analysis suggests that investors may have noticed some promising signs beyond the statutory profit figures.

See our latest analysis for Jiangsu Newamstar Packaging MachineryLtd

The Impact Of Unusual Items On Profit

To properly understand Jiangsu Newamstar Packaging MachineryLtd's profit results, we need to consider the CN¥26m expense attributed to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. Jiangsu Newamstar Packaging MachineryLtd took a rather significant hit from unusual items in the year to March 2024. As a result, we can surmise that the unusual items made its statutory profit significantly weaker than it would otherwise be.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Jiangsu Newamstar Packaging MachineryLtd.

Our Take On Jiangsu Newamstar Packaging MachineryLtd's Profit Performance

As we discussed above, we think the significant unusual expense will make Jiangsu Newamstar Packaging MachineryLtd's statutory profit lower than it would otherwise have been. Because of this, we think Jiangsu Newamstar Packaging MachineryLtd's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! Unfortunately, though, its earnings per share actually fell back over 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 while earnings quality is important, it's equally important to consider the risks facing Jiangsu Newamstar Packaging MachineryLtd at this point in time. Every company has risks, and we've spotted 5 warning signs for Jiangsu Newamstar Packaging MachineryLtd (of which 3 are potentially serious!) you should know about.

This note has only looked at a single factor that sheds light on the nature of Jiangsu Newamstar Packaging MachineryLtd'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.