Some May Be Optimistic About Henan Hengxing Science & TechnologyLtd's (SZSE:002132) Earnings

The market was pleased with the recent earnings report from Henan Hengxing Science & Technology Co.,Ltd. (SZSE:002132), despite the profit numbers being soft. Our analysis suggests that investors may have noticed some promising signs beyond the statutory profit figures.

View our latest analysis for Henan Hengxing Science & TechnologyLtd

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Henan Hengxing Science & TechnologyLtd's profit was reduced by CN¥48m, due to unusual items, over the last year. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. 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. If Henan Hengxing Science & TechnologyLtd doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Henan Hengxing Science & TechnologyLtd.

Our Take On Henan Hengxing Science & TechnologyLtd's Profit Performance

Because unusual items detracted from Henan Hengxing Science & TechnologyLtd's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Henan Hengxing Science & TechnologyLtd's earnings potential is at least as good as it seems, and maybe even better! Unfortunately, though, its earnings per share actually fell back over 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. To that end, you should learn about the 4 warning signs we've spotted with Henan Hengxing Science & TechnologyLtd (including 1 which makes us a bit uncomfortable).

This note has only looked at a single factor that sheds light on the nature of Henan Hengxing Science & TechnologyLtd'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. 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.