Hebei Gongda Keya Energy TechnologyLtd's (SZSE:301197) Sluggish Earnings Might Be Just The Beginning Of Its Problems

Last week's earnings announcement from Hebei Gongda Keya Energy Technology Co.,Ltd. (SZSE:301197) was disappointing to investors, with a sluggish profit figure. We did some further digging and think they have a few more reasons to be concerned beyond the statutory profit.

Check out our latest analysis for Hebei Gongda Keya Energy TechnologyLtd

The Impact Of Unusual Items On Profit

To properly understand Hebei Gongda Keya Energy TechnologyLtd's profit results, we need to consider the CN¥19m gain attributed to unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. 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. We can see that Hebei Gongda Keya Energy TechnologyLtd's positive unusual items were quite significant relative to its profit in the year to September 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 Hebei Gongda Keya Energy TechnologyLtd.

Our Take On Hebei Gongda Keya Energy TechnologyLtd's Profit Performance

As previously mentioned, Hebei Gongda Keya Energy TechnologyLtd's large boost from unusual items won't be there indefinitely, so its statutory earnings are probably a poor guide to its underlying profitability. As a result, we think it may well be the case that Hebei Gongda Keya Energy TechnologyLtd's underlying earnings power is lower than its statutory profit. In further bad news, its earnings per share decreased 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. So while earnings quality is important, it's equally important to consider the risks facing Hebei Gongda Keya Energy TechnologyLtd at this point in time. When we did our research, we found 4 warning signs for Hebei Gongda Keya Energy TechnologyLtd (1 shouldn't be ignored!) that we believe deserve your full attention.

This note has only looked at a single factor that sheds light on the nature of Hebei Gongda Keya Energy TechnologyLtd'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.