Zhejiang Wanfeng ChemicalLtd's (SHSE:603172) Anemic Earnings Might Be Worse Than You Think

The market rallied behind Zhejiang Wanfeng Chemical Co.,Ltd.'s (SHSE:603172) stock, leading do a rise in the share price after its recent weak earnings report. Sometimes, shareholders are willing to ignore soft numbers with the hope that they will improve, but our analysis suggests this is unlikely for Zhejiang Wanfeng ChemicalLtd.

Check out our latest analysis for Zhejiang Wanfeng ChemicalLtd

The Impact Of Unusual Items On Profit

For anyone who wants to understand Zhejiang Wanfeng ChemicalLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥7.4m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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, after all, that's exactly what the accounting terminology implies. Zhejiang Wanfeng ChemicalLtd had a rather significant contribution from unusual items relative to its profit to March 2024. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger 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 Wanfeng ChemicalLtd.

Our Take On Zhejiang Wanfeng ChemicalLtd's Profit Performance

As previously mentioned, Zhejiang Wanfeng ChemicalLtd's large boost from unusual items won't be there indefinitely, so its statutory earnings are probably a poor guide to its underlying profitability. As a result, we think it may well be the case that Zhejiang Wanfeng ChemicalLtd's underlying earnings power is lower than its statutory profit. Sadly, its EPS was down over the last twelve months. 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. To help with this, we've discovered 5 warning signs (1 is significant!) that you ought to be aware of before buying any shares in Zhejiang Wanfeng ChemicalLtd.

This note has only looked at a single factor that sheds light on the nature of Zhejiang Wanfeng ChemicalLtd's profit. But there are plenty of other ways to inform your opinion of a company. 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. 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.