Ningbo Kangqiang Electronics' (SZSE:002119) Anemic Earnings Might Be Worse Than You Think

A lackluster earnings announcement from Ningbo Kangqiang Electronics Co., Ltd (SZSE:002119) last week didn't sink the stock price. However, we believe that investors should be aware of some underlying factors which may be of concern.

Check out our latest analysis for Ningbo Kangqiang Electronics

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Ningbo Kangqiang Electronics' profit received a boost of CN¥8.6m in unusual items, over the last year. 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. Which is hardly surprising, given the name. If Ningbo Kangqiang Electronics doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Ningbo Kangqiang Electronics.

Our Take On Ningbo Kangqiang Electronics' Profit Performance

Arguably, Ningbo Kangqiang Electronics' statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Ningbo Kangqiang Electronics' 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. While it's very important to consider the profit and loss statement, you can also learn a lot about a company by looking at its balance sheet. You can see our latest analysis on Ningbo Kangqiang Electronics' balance sheet health here.

Today we've zoomed in on a single data point to better understand the nature of Ningbo Kangqiang Electronics' 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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.

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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.