Anhui Wanwei Updated High-Tech Material IndustryLtd's (SHSE:600063) Profits Appear To Have Quality Issues

The market for Anhui Wanwei Updated High-Tech Material Industry Co.,Ltd's (SHSE:600063) stock was strong after it released a healthy earnings report last week. While the profit numbers were good, our analysis has found some concerning factors that shareholders should be aware of.

How Do Unusual Items Influence Profit?

For anyone who wants to understand Anhui Wanwei Updated High-Tech Material IndustryLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥33m worth of 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. If Anhui Wanwei Updated High-Tech Material IndustryLtd 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 Anhui Wanwei Updated High-Tech Material IndustryLtd's Profit Performance

We'd posit that Anhui Wanwei Updated High-Tech Material IndustryLtd'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 Anhui Wanwei Updated High-Tech Material IndustryLtd's statutory profits are better than its underlying earnings power. The good news is that, its earnings per share increased by 6.3% 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. So while earnings quality is important, it's equally important to consider the risks facing Anhui Wanwei Updated High-Tech Material IndustryLtd at this point in time. Our analysis shows 2 warning signs for Anhui Wanwei Updated High-Tech Material IndustryLtd (1 doesn't sit too well with us!) and we strongly recommend you look at them before investing.

This note has only looked at a single factor that sheds light on the nature of Anhui Wanwei Updated High-Tech Material IndustryLtd'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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.