We Think That There Are More Issues For Haining China Leather MarketLtd (SZSE:002344) Than Just Sluggish Earnings

A lackluster earnings announcement from Haining China Leather Market Co.,Ltd (SZSE:002344) 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.

See our latest analysis for Haining China Leather MarketLtd

How Do Unusual Items Influence Profit?

For anyone who wants to understand Haining China Leather MarketLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥14m 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 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. If Haining China Leather MarketLtd 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 Haining China Leather MarketLtd's Profit Performance

Arguably, Haining China Leather MarketLtd's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Haining China Leather MarketLtd's true underlying earnings power is actually less than its statutory profit. In further bad news, its earnings per share decreased in 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. For example - Haining China Leather MarketLtd has 2 warning signs we think you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Haining China Leather MarketLtd'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 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.