Ningbo ShanshanLtd's (SHSE:600884) Shareholders Have More To Worry About Than Only Soft Earnings

Ningbo Shanshan Co.,Ltd.'s (SHSE:600884) stock showed strength, with investors undeterred by its weak earnings report. We think that shareholders might be missing some concerning factors that our analysis found.

Check out our latest analysis for Ningbo ShanshanLtd

The Impact Of Unusual Items On Profit

For anyone who wants to understand Ningbo ShanshanLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥139m 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. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And that's as you'd expect, given these boosts are described as 'unusual'. If Ningbo ShanshanLtd 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 Ningbo ShanshanLtd's Profit Performance

Arguably, Ningbo ShanshanLtd's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Ningbo ShanshanLtd'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. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For instance, we've identified 4 warning signs for Ningbo ShanshanLtd (2 are significant) you should be familiar with.

This note has only looked at a single factor that sheds light on the nature of Ningbo ShanshanLtd's profit. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. 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.