Shandong Tongda Island New MaterialsLtd's (SZSE:300321) Earnings Are Weaker Than They Seem

Shandong Tongda Island New Materials Co.,Ltd.'s (SZSE:300321) stock was strong after they recently reported robust earnings. However, we think that shareholders may be missing some concerning details in the numbers.

See our latest analysis for Shandong Tongda Island New MaterialsLtd

The Impact Of Unusual Items On Profit

For anyone who wants to understand Shandong Tongda Island New MaterialsLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥10m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And that's as you'd expect, given these boosts are described as 'unusual'. We can see that Shandong Tongda Island New MaterialsLtd's positive unusual items were quite significant relative to its profit in the year to June 2024. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Shandong Tongda Island New MaterialsLtd.

Our Take On Shandong Tongda Island New MaterialsLtd's Profit Performance

As we discussed above, we think the significant positive unusual item makes Shandong Tongda Island New MaterialsLtd's earnings a poor guide to its underlying profitability. For this reason, we think that Shandong Tongda Island New MaterialsLtd's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. The good news is that it earned a profit in the last twelve months, despite its previous loss. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example, we've found that Shandong Tongda Island New MaterialsLtd has 3 warning signs (1 makes us a bit uncomfortable!) that deserve your attention before going any further with your analysis.

Today we've zoomed in on a single data point to better understand the nature of Shandong Tongda Island New MaterialsLtd's profit. But there are plenty of other ways to inform your opinion of a company. 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 with significant insider holdings 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.