We Think That There Are More Issues For Zhejiang Juhua (SHSE:600160) Than Just Sluggish Earnings

The market wasn't impressed with the soft earnings from Zhejiang Juhua Co., Ltd. (SHSE:600160) recently. We did some analysis, and found that there are some reasons to be cautious about the headline numbers.

View our latest analysis for Zhejiang Juhua

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Zhejiang Juhua's profit received a boost of CN¥158m in unusual items, over the last year. 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 Zhejiang Juhua 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 Zhejiang Juhua's Profit Performance

Arguably, Zhejiang Juhua's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Zhejiang Juhua's statutory profits are better than its underlying earnings power. But the good news is that its EPS growth over the last three years has been very impressive. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. At Simply Wall St, we found 1 warning sign for Zhejiang Juhua and we think they deserve your attention.

This note has only looked at a single factor that sheds light on the nature of Zhejiang Juhua'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.