Zhejiang Dongri Limited's (SHSE:600113) Earnings Are Of Questionable Quality

Zhejiang Dongri Limited Company (SHSE:600113) announced strong profits, but the stock was stagnant. We did some digging, and we found some concerning factors in the details.

See our latest analysis for Zhejiang Dongri Limited

The Impact Of Unusual Items On Profit

For anyone who wants to understand Zhejiang Dongri Limited's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥32m worth of unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. 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 that's as you'd expect, given these boosts are described as 'unusual'. If Zhejiang Dongri Limited doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

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

Our Take On Zhejiang Dongri Limited's Profit Performance

Arguably, Zhejiang Dongri Limited's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Zhejiang Dongri Limited's true underlying earnings power is actually less than its statutory profit. But on the bright side, its earnings per share have grown at an extremely impressive rate 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. At Simply Wall St, we found 2 warning signs for Zhejiang Dongri Limited and we think they deserve your attention.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.