We Think You Should Be Aware Of Some Concerning Factors In Zhejiang Rongsheng Environmental Protection Paper's (SHSE:603165) Earnings

Zhejiang Rongsheng Environmental Protection Paper Co., Ltd.'s (SHSE:603165) robust recent earnings didn't do much to move the stock. We think this is due to investors looking beyond the statutory profits and being concerned with what they see.

View our latest analysis for Zhejiang Rongsheng Environmental Protection Paper

The Impact Of Unusual Items On Profit

To properly understand Zhejiang Rongsheng Environmental Protection Paper's profit results, we need to consider the CN¥25m gain attributed to unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

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 Rongsheng Environmental Protection Paper's Profit Performance

We'd posit that Zhejiang Rongsheng Environmental Protection Paper's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that Zhejiang Rongsheng Environmental Protection Paper's statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 33% 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. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Zhejiang Rongsheng Environmental Protection Paper.

This note has only looked at a single factor that sheds light on the nature of Zhejiang Rongsheng Environmental Protection Paper'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. 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 with significant insider holdings 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.