Zhejiang Zhongcheng Packing Material's (SZSE:002522) Weak Earnings May Only Reveal A Part Of The Whole Picture

Investors were disappointed by Zhejiang Zhongcheng Packing Material Co., Ltd.'s (SZSE:002522 ) latest earnings release. We did some further digging and think they have a few more reasons to be concerned beyond the statutory profit.

See our latest analysis for Zhejiang Zhongcheng Packing Material

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Zhejiang Zhongcheng Packing Material's profit received a boost of CN¥11m in unusual items, over the last year. 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 analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. Which is hardly surprising, given the name. 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).

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Zhejiang Zhongcheng Packing Material.

Our Take On Zhejiang Zhongcheng Packing Material's Profit Performance

Arguably, Zhejiang Zhongcheng Packing Material's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Zhejiang Zhongcheng Packing Material's statutory profits are better than its underlying earnings power. Sadly, its EPS was down over the last twelve months. 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. If you'd like to know more about Zhejiang Zhongcheng Packing Material as a business, it's important to be aware of any risks it's facing. You'd be interested to know, that we found 1 warning sign for Zhejiang Zhongcheng Packing Material and you'll want to know about this.

This note has only looked at a single factor that sheds light on the nature of Zhejiang Zhongcheng Packing Material'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 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.