The Strong Earnings Posted By Nanjing Hanrui CobaltLtd (SZSE:300618) Are A Good Indication Of The Strength Of The Business

Nanjing Hanrui Cobalt Co.,Ltd. (SZSE:300618) just reported healthy earnings but the stock price didn't move much. We think that investors have missed some encouraging factors underlying the profit figures.

Check out our latest analysis for Nanjing Hanrui CobaltLtd

How Do Unusual Items Influence Profit?

For anyone who wants to understand Nanjing Hanrui CobaltLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥75m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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. Assuming those unusual expenses don't come up again, we'd therefore expect Nanjing Hanrui CobaltLtd to produce a higher profit next year, all else being equal.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Nanjing Hanrui CobaltLtd.

Our Take On Nanjing Hanrui CobaltLtd's Profit Performance

Because unusual items detracted from Nanjing Hanrui CobaltLtd'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 Nanjing Hanrui CobaltLtd's earnings potential is at least as good as it seems, and maybe even better! Furthermore, it has done a great job growing EPS over the last year. 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. If you'd like to know more about Nanjing Hanrui CobaltLtd as a business, it's important to be aware of any risks it's facing. You'd be interested to know, that we found 2 warning signs for Nanjing Hanrui CobaltLtd and you'll want to know about these bad boys.

This note has only looked at a single factor that sheds light on the nature of Nanjing Hanrui CobaltLtd'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.