We Think That There Are More Issues For Fujian Nanwang Environment Protection Scien-TechLtd (SZSE:301355) Than Just Sluggish Earnings

A lackluster earnings announcement from Fujian Nanwang Environment Protection Scien-Tech Co.,Ltd (SZSE:301355) last week didn't sink the stock price. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

View our latest analysis for Fujian Nanwang Environment Protection Scien-TechLtd

How Do Unusual Items Influence Profit?

To properly understand Fujian Nanwang Environment Protection Scien-TechLtd's profit results, we need to consider the CN¥11m gain attributed to unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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. We can see that Fujian Nanwang Environment Protection Scien-TechLtd's positive unusual items were quite significant relative to its profit in the year to June 2024. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Fujian Nanwang Environment Protection Scien-TechLtd.

Our Take On Fujian Nanwang Environment Protection Scien-TechLtd's Profit Performance

As previously mentioned, Fujian Nanwang Environment Protection Scien-TechLtd's large boost from unusual items won't be there indefinitely, so its statutory earnings are probably a poor guide to its underlying profitability. As a result, we think it may well be the case that Fujian Nanwang Environment Protection Scien-TechLtd's underlying earnings power is lower than its statutory profit. In further bad news, its earnings per share decreased in the last year. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Our analysis shows 3 warning signs for Fujian Nanwang Environment Protection Scien-TechLtd (1 makes us a bit uncomfortable!) and we strongly recommend you look at them before investing.

This note has only looked at a single factor that sheds light on the nature of Fujian Nanwang Environment Protection Scien-TechLtd'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.