Earnings Troubles May Signal Larger Issues for Cangzhou Mingzhu PlasticLtd (SZSE:002108) Shareholders

A lackluster earnings announcement from Cangzhou Mingzhu Plastic Co.,Ltd. (SZSE:002108) last week didn't sink the stock price. We think that investors are worried about some weaknesses underlying the earnings.

See our latest analysis for Cangzhou Mingzhu PlasticLtd

How Do Unusual Items Influence Profit?

For anyone who wants to understand Cangzhou Mingzhu PlasticLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥41m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. Which is hardly surprising, given the name. If Cangzhou Mingzhu PlasticLtd 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 Cangzhou Mingzhu PlasticLtd.

Our Take On Cangzhou Mingzhu PlasticLtd's Profit Performance

Arguably, Cangzhou Mingzhu PlasticLtd's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Cangzhou Mingzhu PlasticLtd's statutory profits are better than its underlying earnings power. In further bad news, its earnings per share decreased in the last year. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. You'd be interested to know, that we found 1 warning sign for Cangzhou Mingzhu PlasticLtd and you'll want to know about this.

This note has only looked at a single factor that sheds light on the nature of Cangzhou Mingzhu PlasticLtd'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.

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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.