There May Be Reason For Hope In Zhejiang Hengtong HoldingLtd's (SHSE:600226) Disappointing Earnings

Shareholders appeared unconcerned with Zhejiang Hengtong Holding Co.,Ltd.'s (SHSE:600226) lackluster earnings report last week. We did some digging, and we believe the earnings are stronger than they seem.

See our latest analysis for Zhejiang Hengtong HoldingLtd

How Do Unusual Items Influence Profit?

To properly understand Zhejiang Hengtong HoldingLtd's profit results, we need to consider the CN¥38m expense attributed to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. In the twelve months to June 2024, Zhejiang Hengtong HoldingLtd had a big unusual items expense. As a result, we can surmise that the unusual items made its statutory profit significantly weaker than it would otherwise be.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Zhejiang Hengtong HoldingLtd.

Our Take On Zhejiang Hengtong HoldingLtd's Profit Performance

As we mentioned previously, the Zhejiang Hengtong HoldingLtd's profit was hampered by unusual items in the last year. Based on this observation, we consider it possible that Zhejiang Hengtong HoldingLtd's statutory profit actually understates its earnings potential! Unfortunately, though, its earnings per share actually fell back over 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. If you want to do dive deeper into Zhejiang Hengtong HoldingLtd, you'd also look into what risks it is currently facing. At Simply Wall St, we found 1 warning sign for Zhejiang Hengtong HoldingLtd and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of Zhejiang Hengtong HoldingLtd'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.