Zhejiang Dongwang Times Technology's (SHSE:600052) Solid Profits Have Weak Fundamentals

Despite posting some strong earnings, the market for Zhejiang Dongwang Times Technology Co., Ltd.'s (SHSE:600052) stock hasn't moved much. Our analysis suggests that shareholders have noticed something concerning in the numbers.

View our latest analysis for Zhejiang Dongwang Times Technology

How Do Unusual Items Influence Profit?

For anyone who wants to understand Zhejiang Dongwang Times Technology's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥60m worth of 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. Which is hardly surprising, given the name. Zhejiang Dongwang Times Technology had a rather significant contribution from unusual items relative to its profit to June 2024. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

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

Our Take On Zhejiang Dongwang Times Technology's Profit Performance

As we discussed above, we think the significant positive unusual item makes Zhejiang Dongwang Times Technology's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Zhejiang Dongwang Times Technology's underlying earnings power is lower than its statutory profit. On the bright side, the company showed enough improvement to book a profit this year, after losing money 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. If you want to do dive deeper into Zhejiang Dongwang Times Technology, you'd also look into what risks it is currently facing. When we did our research, we found 3 warning signs for Zhejiang Dongwang Times Technology (1 is concerning!) that we believe deserve your full attention.

This note has only looked at a single factor that sheds light on the nature of Zhejiang Dongwang Times Technology's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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 with significant insider holdings 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.