We Think That There Are More Issues For North Huajin Chemical IndustriesLtd (SZSE:000059) Than Just Sluggish Earnings

The market wasn't impressed with the soft earnings from North Huajin Chemical Industries Co.,Ltd (SZSE:000059) recently. Our analysis has found some reasons to be concerned, beyond the weak headline numbers.

Check out our latest analysis for North Huajin Chemical IndustriesLtd

The Impact Of Unusual Items On Profit

For anyone who wants to understand North Huajin Chemical IndustriesLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥66m 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. 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. If North Huajin Chemical IndustriesLtd 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 North Huajin Chemical IndustriesLtd's Profit Performance

We'd posit that North Huajin Chemical IndustriesLtd's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that North Huajin Chemical IndustriesLtd'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. 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. At Simply Wall St, we found 2 warning signs for North Huajin Chemical IndustriesLtd and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of North Huajin Chemical IndustriesLtd's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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 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.