HMT (Xiamen) New Technical Materials' (SHSE:603306) Strong Earnings Are Of Good Quality

The subdued stock price reaction suggests that HMT (Xiamen) New Technical Materials Co., Ltd's (SHSE:603306) strong earnings didn't offer any surprises. We think that investors have missed some encouraging factors underlying the profit figures.

See our latest analysis for HMT (Xiamen) New Technical Materials

How Do Unusual Items Influence Profit?

For anyone who wants to understand HMT (Xiamen) New Technical Materials' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥42m due 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, after all, that's exactly what the accounting terminology implies. If HMT (Xiamen) New Technical Materials doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming 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 HMT (Xiamen) New Technical Materials' Profit Performance

Unusual items (expenses) detracted from HMT (Xiamen) New Technical Materials' earnings over the last year, but we might see an improvement next year. Because of this, we think HMT (Xiamen) New Technical Materials' earnings potential is at least as good as it seems, and maybe even better! And on top of that, its earnings per share have grown at 14% per year over the last three years. 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. At Simply Wall St, we found 1 warning sign for HMT (Xiamen) New Technical Materials and we think they deserve your attention.

This note has only looked at a single factor that sheds light on the nature of HMT (Xiamen) New Technical Materials' profit. But there are plenty of other ways to inform your opinion of a company. 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.