We Think Kuangda Technology Group's (SZSE:002516) Solid Earnings Are Understated

Kuangda Technology Group Co., Ltd.'s (SZSE:002516) recent earnings report didn't offer any surprises, with the shares unchanged over the last week. Our analysis suggests that shareholders might be missing some positive underlying factors in the earnings report.

Check out our latest analysis for Kuangda Technology Group

The Impact Of Unusual Items On Profit

For anyone who wants to understand Kuangda Technology Group's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥24m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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. Assuming those unusual expenses don't come up again, we'd therefore expect Kuangda Technology Group to produce a higher profit next year, all else being equal.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Kuangda Technology Group.

Our Take On Kuangda Technology Group's Profit Performance

Because unusual items detracted from Kuangda Technology Group's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Kuangda Technology Group's earnings potential is at least as good as it seems, and maybe even better! 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Kuangda Technology Group.

This note has only looked at a single factor that sheds light on the nature of Kuangda Technology Group's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. 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.