Shenzhen Cotran New MaterialLtd's (SZSE:300731) Strong Earnings Are Of Good Quality

Investors were underwhelmed by the solid earnings posted by Shenzhen Cotran New Material Co.,Ltd. (SZSE:300731) recently. We have done some analysis and have found some comforting factors beneath the profit numbers.

See our latest analysis for Shenzhen Cotran New MaterialLtd

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Shenzhen Cotran New MaterialLtd's profit was reduced by CN¥5.8m, due to unusual items, over the last year. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Shenzhen Cotran New MaterialLtd 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 Shenzhen Cotran New MaterialLtd.

Our Take On Shenzhen Cotran New MaterialLtd's Profit Performance

Because unusual items detracted from Shenzhen Cotran New MaterialLtd'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 Shenzhen Cotran New MaterialLtd's earnings potential is at least as good as it seems, and maybe even better! And the EPS is up 46% over the last twelve months. 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. 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. Every company has risks, and we've spotted 2 warning signs for Shenzhen Cotran New MaterialLtd you should know about.

Today we've zoomed in on a single data point to better understand the nature of Shenzhen Cotran New MaterialLtd's 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 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.