Why Zhejiang Zhongjian TechnologyLtd's (SZSE:002779) Earnings Are Better Than They Seem

Zhejiang Zhongjian Technology Co.,Ltd (SZSE:002779) announced a healthy earnings result recently, and the market rewarded it with a strong uplift in the stock price. This reaction by the market reaction is understandable when looking at headline profits and we have found some further encouraging factors.

View our latest analysis for Zhejiang Zhongjian TechnologyLtd

How Do Unusual Items Influence Profit?

To properly understand Zhejiang Zhongjian TechnologyLtd's profit results, we need to consider the CN¥11m expense attributed 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. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. If Zhejiang Zhongjian TechnologyLtd doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Zhejiang Zhongjian TechnologyLtd.

Our Take On Zhejiang Zhongjian TechnologyLtd's Profit Performance

Because unusual items detracted from Zhejiang Zhongjian TechnologyLtd's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Zhejiang Zhongjian TechnologyLtd's statutory profit actually understates its earnings potential! And the EPS is up 28% over the last twelve months. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. While earnings are important, another area to consider is the balance sheet. You can see our latest analysis on Zhejiang Zhongjian TechnologyLtd's balance sheet health here.

Today we've zoomed in on a single data point to better understand the nature of Zhejiang Zhongjian TechnologyLtd'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.