Shenzhen Batian Ecotypic Engineering's (SZSE:002170) Profits Appear To Have Quality Issues

Shenzhen Batian Ecotypic Engineering Co., Ltd.'s (SZSE:002170) healthy profit numbers didn't contain any surprises for investors. We think this is due to investors looking beyond the statutory profits and being concerned with what they see.

See our latest analysis for Shenzhen Batian Ecotypic Engineering

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Shenzhen Batian Ecotypic Engineering's profit received a boost of CN¥40m in unusual items, over the last year. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. 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. 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 Shenzhen Batian Ecotypic Engineering's Profit Performance

Arguably, Shenzhen Batian Ecotypic Engineering's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Shenzhen Batian Ecotypic Engineering's true underlying earnings power is actually less than its statutory profit. But on the bright side, its earnings per share have grown at an extremely impressive rate over the last three years. 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. 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. When we did our research, we found 2 warning signs for Shenzhen Batian Ecotypic Engineering (1 is significant!) that we believe deserve your full attention.

This note has only looked at a single factor that sheds light on the nature of Shenzhen Batian Ecotypic Engineering'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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.