China Northern Rare Earth (Group) High-TechLtd's (SHSE:600111) Sluggish Earnings Might Be Just The Beginning Of Its Problems

The market rallied behind China Northern Rare Earth (Group) High-Tech Co.,Ltd's (SHSE:600111) stock, leading do a rise in the share price after its recent weak earnings report. While shareholders may be willing to overlook soft profit numbers, we believe that they should also be taking into account some other factors which may be cause for concern.

Check out our latest analysis for China Northern Rare Earth (Group) High-TechLtd

The Impact Of Unusual Items On Profit

For anyone who wants to understand China Northern Rare Earth (Group) High-TechLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥210m worth of unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. Which is hardly surprising, given the name. If China Northern Rare Earth (Group) High-TechLtd 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 China Northern Rare Earth (Group) High-TechLtd's Profit Performance

Arguably, China Northern Rare Earth (Group) High-TechLtd's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that China Northern Rare Earth (Group) High-TechLtd's true underlying earnings power is actually less than its statutory profit. In further bad news, its earnings per share decreased in the last year. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Case in point: We've spotted 1 warning sign for China Northern Rare Earth (Group) High-TechLtd you should be aware of.

This note has only looked at a single factor that sheds light on the nature of China Northern Rare Earth (Group) High-TechLtd'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. 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.