Jiaxing ZMAX Optech's (SHSE:688307) Solid Profits Have Weak Fundamentals

Jiaxing ZMAX Optech Co., Ltd.'s (SHSE:688307) robust earnings report didn't manage to move the market for its stock. We did some digging, and we found some concerning factors in the details.

View our latest analysis for Jiaxing ZMAX Optech

How Do Unusual Items Influence Profit?

To properly understand Jiaxing ZMAX Optech's profit results, we need to consider the CN¥3.3m gain attributed to unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. 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 Jiaxing ZMAX Optech 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 Jiaxing ZMAX Optech's Profit Performance

Arguably, Jiaxing ZMAX Optech's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Jiaxing ZMAX Optech's true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 18% per annum growth in EPS for the last three. 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 if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example, we've discovered 2 warning signs that you should run your eye over to get a better picture of Jiaxing ZMAX Optech.

Today we've zoomed in on a single data point to better understand the nature of Jiaxing ZMAX Optech'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.