There May Be Some Bright Spots In Jiangsu Hongde Special PartsLtd's (SZSE:301163) Earnings

Jiangsu Hongde Special Parts Co.,Ltd.'s (SZSE:301163) recent soft profit numbers didn't appear to worry shareholders, as the stock price showed strength. Our analysis suggests that investors may have noticed some promising signs beyond the statutory profit figures.

View our latest analysis for Jiangsu Hongde Special PartsLtd

The Impact Of Unusual Items On Profit

To properly understand Jiangsu Hongde Special PartsLtd's profit results, we need to consider the CN¥4.2m expense attributed to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. If Jiangsu Hongde Special PartsLtd doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Jiangsu Hongde Special PartsLtd.

Our Take On Jiangsu Hongde Special PartsLtd's Profit Performance

Unusual items (expenses) detracted from Jiangsu Hongde Special PartsLtd's earnings over the last year, but we might see an improvement next year. Because of this, we think Jiangsu Hongde Special PartsLtd's earnings potential is at least as good as it seems, and maybe even better! Unfortunately, though, its earnings per share actually fell back 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Our analysis shows 3 warning signs for Jiangsu Hongde Special PartsLtd (2 are significant!) and we strongly recommend you look at these before investing.

This note has only looked at a single factor that sheds light on the nature of Jiangsu Hongde Special PartsLtd's profit. But there are plenty of other ways to inform your opinion of a company. 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. 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 that insiders are buying to be useful.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.