Changzhou Wujin Zhongrui Electronic Technology's (SZSE:301587) Anemic Earnings Might Be Worse Than You Think

Investors were disappointed by Changzhou Wujin Zhongrui Electronic Technology Co., Ltd.'s (SZSE:301587 ) latest earnings release. Our analysis has found some reasons to be concerned, beyond the weak headline numbers.

See our latest analysis for Changzhou Wujin Zhongrui Electronic Technology

How Do Unusual Items Influence Profit?

For anyone who wants to understand Changzhou Wujin Zhongrui Electronic Technology's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥8.2m worth of unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's as you'd expect, given these boosts are described as 'unusual'. 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 Changzhou Wujin Zhongrui Electronic Technology.

Our Take On Changzhou Wujin Zhongrui Electronic Technology's Profit Performance

Arguably, Changzhou Wujin Zhongrui Electronic Technology's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Changzhou Wujin Zhongrui Electronic Technology's true underlying earnings power is actually less than its statutory profit. Sadly, its EPS was down over the last twelve months. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. At Simply Wall St, we found 1 warning sign for Changzhou Wujin Zhongrui Electronic Technology and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of Changzhou Wujin Zhongrui Electronic Technology'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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.