Jiangsu Hongtian TechnologyLtd (SHSE:603800) Strong Profits May Be Masking Some Underlying Issues

The market shrugged off Jiangsu Hongtian Technology Co.,Ltd.'s (SHSE:603800) solid earnings report. We think that investors might be worried about some concerning underlying factors.

See our latest analysis for Jiangsu Hongtian TechnologyLtd

The Impact Of Unusual Items On Profit

To properly understand Jiangsu Hongtian TechnologyLtd's profit results, we need to consider the CN¥58m gain attributed to unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

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 Jiangsu Hongtian TechnologyLtd's Profit Performance

We'd posit that Jiangsu Hongtian TechnologyLtd's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that Jiangsu Hongtian TechnologyLtd's true underlying earnings power is actually less than its statutory profit. The silver lining is that its EPS growth over the last year has been really wonderful, even if it's not a perfect measure. 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. So while earnings quality is important, it's equally important to consider the risks facing Jiangsu Hongtian TechnologyLtd at this point in time. At Simply Wall St, we found 2 warning signs for Jiangsu Hongtian TechnologyLtd and we think they deserve your attention.

This note has only looked at a single factor that sheds light on the nature of Jiangsu Hongtian TechnologyLtd's profit. But there are plenty of other ways to inform your opinion of a company. 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.