There May Be Underlying Issues With The Quality Of Ningbo Runhe High-Tech Materials' (SZSE:300727) Earnings

Ningbo Runhe High-Tech Materials Co., Ltd.'s (SZSE:300727) stock was strong after they recently reported robust earnings. However, we think that shareholders may be missing some concerning details in the numbers.

View our latest analysis for Ningbo Runhe High-Tech Materials

How Do Unusual Items Influence Profit?

For anyone who wants to understand Ningbo Runhe High-Tech Materials' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥6.8m 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'. 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 Ningbo Runhe High-Tech Materials' Profit Performance

Arguably, Ningbo Runhe High-Tech Materials' statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Ningbo Runhe High-Tech Materials' statutory profits are better than its underlying earnings power. Nonetheless, it's still worth noting that its earnings per share have grown at 29% 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. If you want to do dive deeper into Ningbo Runhe High-Tech Materials, you'd also look into what risks it is currently facing. To help with this, we've discovered 2 warning signs (1 is a bit concerning!) that you ought to be aware of before buying any shares in Ningbo Runhe High-Tech Materials.

This note has only looked at a single factor that sheds light on the nature of Ningbo Runhe High-Tech Materials' profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.