Nanya New Material TechnologyLtd's (SHSE:688519) Shareholders May Want To Dig Deeper Than Statutory Profit

The market shrugged off Nanya New Material Technology Co.,Ltd's (SHSE:688519) solid earnings report. Our analysis showed that there are some concerning factors in the earnings that investors may be cautious of.

Check out our latest analysis for Nanya New Material TechnologyLtd

The Impact Of Unusual Items On Profit

To properly understand Nanya New Material TechnologyLtd's profit results, we need to consider the CN¥40m 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. And that's as you'd expect, given these boosts are described as 'unusual'. Nanya New Material TechnologyLtd had a rather significant contribution from unusual items relative to its profit to September 2024. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Nanya New Material TechnologyLtd.

Our Take On Nanya New Material TechnologyLtd's Profit Performance

As previously mentioned, Nanya New Material 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. For this reason, we think that Nanya New Material TechnologyLtd's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. On the bright side, the company showed enough improvement to book a profit this year, after losing money 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 Nanya New Material TechnologyLtd at this point in time. When we did our research, we found 3 warning signs for Nanya New Material TechnologyLtd (1 is a bit concerning!) that we believe deserve your full attention.

Today we've zoomed in on a single data point to better understand the nature of Nanya New Material TechnologyLtd's 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 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.