Impressive Earnings May Not Tell The Whole Story For HMT (Xiamen) New Technical Materials (SHSE:603306)

Unsurprisingly, HMT (Xiamen) New Technical Materials Co., Ltd's (SHSE:603306) stock price was strong on the back of its healthy earnings report. We did some analysis and think that investors are missing some details hidden beneath the profit numbers.

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

The Impact Of Unusual Items On Profit

Importantly, our data indicates that HMT (Xiamen) New Technical Materials' profit received a boost of CN¥38m in unusual items, over the last year. 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 HMT (Xiamen) New Technical Materials 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 HMT (Xiamen) New Technical Materials' Profit Performance

We'd posit that HMT (Xiamen) New Technical Materials' statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that HMT (Xiamen) New Technical Materials' statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 38% per annum growth in EPS for the last three. 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. So while earnings quality is important, it's equally important to consider the risks facing HMT (Xiamen) New Technical Materials at this point in time. Every company has risks, and we've spotted 2 warning signs for HMT (Xiamen) New Technical Materials you should know about.

Today we've zoomed in on a single data point to better understand the nature of HMT (Xiamen) New Technical Materials' 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 with significant insider holdings 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.