Shaanxi Huada Science TechnologyLtd's (SZSE:301517) Earnings Are Of Questionable Quality

Shaanxi Huada Science Technology Co.,Ltd.'s (SZSE:301517) robust earnings report didn't manage to move the market for its stock. Our analysis suggests that shareholders have noticed something concerning in the numbers.

See our latest analysis for Shaanxi Huada Science TechnologyLtd

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Shaanxi Huada Science TechnologyLtd's profit received a boost of CN¥15m in unusual items, over the last year. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. 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, after all, that's exactly what the accounting terminology implies. 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 Shaanxi Huada Science TechnologyLtd.

Our Take On Shaanxi Huada Science TechnologyLtd's Profit Performance

We'd posit that Shaanxi Huada Science TechnologyLtd's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that Shaanxi Huada Science TechnologyLtd's true underlying earnings power is actually less than its statutory profit. Nonetheless, it's still worth noting that its earnings per share have grown at 23% over the last three years. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. If you'd like to know more about Shaanxi Huada Science TechnologyLtd as a business, it's important to be aware of any risks it's facing. For example - Shaanxi Huada Science TechnologyLtd has 1 warning sign we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Shaanxi Huada Science TechnologyLtd'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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.

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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.