Zhuzhou Times New Material Technology (SHSE:600458) Strong Profits May Be Masking Some Underlying Issues

Zhuzhou Times New Material Technology Co., Ltd.'s (SHSE:600458) healthy profit numbers didn't contain any surprises for investors. We think this is due to investors looking beyond the statutory profits and being concerned with what they see.

See our latest analysis for Zhuzhou Times New Material Technology

The Impact Of Unusual Items On Profit

To properly understand Zhuzhou Times New Material Technology's profit results, we need to consider the CN¥70m gain attributed to 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. And that's as you'd expect, given these boosts are described as 'unusual'. If Zhuzhou Times New Material Technology 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 Zhuzhou Times New Material Technology's Profit Performance

We'd posit that Zhuzhou Times New Material Technology's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that Zhuzhou Times New Material Technology's true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 6.4% EPS growth 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. While conducting our analysis, we found that Zhuzhou Times New Material Technology has 2 warning signs and it would be unwise to ignore these.

This note has only looked at a single factor that sheds light on the nature of Zhuzhou Times New Material Technology'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 that insiders are buying.

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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.