We Think You Should Be Aware Of Some Concerning Factors In Zhejiang Benli Technology's (SZSE:301065) Earnings

Following the solid earnings report from Zhejiang Benli Technology Co., Ltd. (SZSE:301065), the market responded by bidding up the stock price. However, we think that shareholders should be cautious as we found some worrying factors underlying the profit.

View our latest analysis for Zhejiang Benli Technology

How Do Unusual Items Influence Profit?

For anyone who wants to understand Zhejiang Benli Technology's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥5.4m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. 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).

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Zhejiang Benli Technology.

Our Take On Zhejiang Benli Technology's Profit Performance

Arguably, Zhejiang Benli Technology's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Zhejiang Benli Technology's true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 12% EPS growth 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. In terms of investment risks, we've identified 1 warning sign with Zhejiang Benli Technology, and understanding this should be part of your investment process.

Today we've zoomed in on a single data point to better understand the nature of Zhejiang Benli Technology'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.

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.