Ningbo TechmationLtd's (SHSE:603015) Earnings Are Of Questionable Quality

Despite posting some strong earnings, the market for Ningbo Techmation Co.,Ltd.'s (SHSE:603015) stock hasn't moved much. Our analysis suggests that this might be because shareholders have noticed some concerning underlying factors.

See our latest analysis for Ningbo TechmationLtd

How Do Unusual Items Influence Profit?

For anyone who wants to understand Ningbo TechmationLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥23m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And, after all, that's exactly what the accounting terminology implies. We can see that Ningbo TechmationLtd'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 Ningbo TechmationLtd.

Our Take On Ningbo TechmationLtd's Profit Performance

As we discussed above, we think the significant positive unusual item makes Ningbo TechmationLtd's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Ningbo TechmationLtd's underlying earnings power is lower than its statutory profit. But the happy news is that, while acknowledging we have to look beyond the statutory numbers, those numbers are still improving, with EPS growing at a very high rate over the last year. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. 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. While conducting our analysis, we found that Ningbo TechmationLtd has 2 warning signs and it would be unwise to ignore them.

This note has only looked at a single factor that sheds light on the nature of Ningbo TechmationLtd's profit. But there are plenty of other ways to inform your opinion of a company. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.