Why Ningbo Kangqiang Electronics' (SZSE:002119) Earnings Are Better Than They Seem

Ningbo Kangqiang Electronics Co., Ltd's (SZSE:002119) recent earnings report didn't offer any surprises, with the shares unchanged over the last week. We did some analysis to find out why and believe that investors might be missing some encouraging factors contained in the earnings.

How Do Unusual Items Influence Profit?

For anyone who wants to understand Ningbo Kangqiang Electronics' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥15m due to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. If Ningbo Kangqiang Electronics doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming 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

Unusual items (expenses) detracted from Ningbo Kangqiang Electronics' earnings over the last year, but we might see an improvement next year. Because of this, we think Ningbo Kangqiang Electronics' earnings potential is at least as good as it seems, and maybe even better! 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. If you want to do dive deeper into Ningbo Kangqiang Electronics, you'd also look into what risks it is currently facing. For example, Ningbo Kangqiang Electronics has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.

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. 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.