We Think You Should Be Aware Of Some Concerning Factors In Winall Hi-tech Seed's (SZSE:300087) Earnings

The market shrugged off Winall Hi-tech Seed Co., Ltd.'s (SZSE:300087) solid earnings report. We did some digging and believe investors may be worried about some underlying factors in the report.

Check out our latest analysis for Winall Hi-tech Seed

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Winall Hi-tech Seed's profit received a boost of CN¥53m in unusual items, over the last year. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. 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 Winall Hi-tech Seed doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

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 Winall Hi-tech Seed's Profit Performance

We'd posit that Winall Hi-tech Seed's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that Winall Hi-tech Seed's statutory profits are better than its underlying earnings power. But on the bright side, its earnings per share have grown at an extremely impressive rate over the last three years. 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. If you want to do dive deeper into Winall Hi-tech Seed, you'd also look into what risks it is currently facing. At Simply Wall St, we found 1 warning sign for Winall Hi-tech Seed and we think they deserve your attention.

This note has only looked at a single factor that sheds light on the nature of Winall Hi-tech Seed'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. 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.