Hongda High-Tech HoldingLtd's (SZSE:002144) Solid Earnings Have Been Accounted For Conservatively

Hongda High-Tech Holding Co.,Ltd.'s (SZSE:002144) solid earnings announcement recently didn't do much to the stock price. We did some digging, and we think that investors are missing some encouraging factors in the underlying numbers.

Check out our latest analysis for Hongda High-Tech HoldingLtd

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Hongda High-Tech HoldingLtd's profit was reduced by CN¥38m, due to unusual items, over the last year. 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 that's hardly a surprise given these line items are considered unusual. In the twelve months to March 2024, Hongda High-Tech HoldingLtd had a big unusual items expense. All else being equal, this would likely have the effect of making the statutory profit look worse than its underlying earnings power.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Hongda High-Tech HoldingLtd.

Our Take On Hongda High-Tech HoldingLtd's Profit Performance

As we mentioned previously, the Hongda High-Tech HoldingLtd's profit was hampered by unusual items in the last year. Because of this, we think Hongda High-Tech HoldingLtd's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! And the EPS is up 15% annually, 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 want to do dive deeper into Hongda High-Tech HoldingLtd, you'd also look into what risks it is currently facing. Case in point: We've spotted 3 warning signs for Hongda High-Tech HoldingLtd you should be mindful of and 1 of these can't be ignored.

Today we've zoomed in on a single data point to better understand the nature of Hongda High-Tech HoldingLtd'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 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.