We Think That There Are Issues Underlying Ganzhou Tengyuan Cobalt New Material's (SZSE:301219) Earnings

Unsurprisingly, Ganzhou Tengyuan Cobalt New Material Co., Ltd.'s (SZSE:301219) stock price was strong on the back of its healthy earnings report. However, we think that shareholders may be missing some concerning details in the numbers.

View our latest analysis for Ganzhou Tengyuan Cobalt New Material

How Do Unusual Items Influence Profit?

To properly understand Ganzhou Tengyuan Cobalt New Material's profit results, we need to consider the CN¥121m gain attributed to unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's as you'd expect, given these boosts are described as 'unusual'. If Ganzhou Tengyuan Cobalt New Material doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

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 Ganzhou Tengyuan Cobalt New Material's Profit Performance

We'd posit that Ganzhou Tengyuan Cobalt New Material's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that Ganzhou Tengyuan Cobalt New Material's statutory profits are better than its underlying earnings power. The good news is that it earned a profit in the last twelve months, despite its previous loss. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Every company has risks, and we've spotted 2 warning signs for Ganzhou Tengyuan Cobalt New Material you should know about.

Today we've zoomed in on a single data point to better understand the nature of Ganzhou Tengyuan Cobalt New Material'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 that insiders are buying 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.