We Think That There Are More Issues For Ningbo Fujia Industrial (SHSE:603219) Than Just Sluggish Earnings

A lackluster earnings announcement from Ningbo Fujia Industrial Co., Ltd. (SHSE:603219) last week didn't sink the stock price. However, we believe that investors should be aware of some underlying factors which may be of concern.

View our latest analysis for Ningbo Fujia Industrial

The Impact Of Unusual Items On Profit

To properly understand Ningbo Fujia Industrial's profit results, we need to consider the CN¥21m 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, after all, that's exactly what the accounting terminology implies. If Ningbo Fujia Industrial 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 Ningbo Fujia Industrial's Profit Performance

Arguably, Ningbo Fujia Industrial's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Ningbo Fujia Industrial's statutory profits are better than its underlying earnings power. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example - Ningbo Fujia Industrial 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 Ningbo Fujia Industrial'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.