Anhui Ronds Science & Technology's (SHSE:688768) Promising Earnings May Rest On Soft Foundations

Anhui Ronds Science & Technology Incorporated Company (SHSE:688768) announced strong profits, but the stock was stagnant. We did some digging, and we found some concerning factors in the details.

See our latest analysis for Anhui Ronds Science & Technology

The Impact Of Unusual Items On Profit

For anyone who wants to understand Anhui Ronds Science & Technology's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥7.5m worth of 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. Which is hardly surprising, given the name. If Anhui Ronds Science & Technology 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 Anhui Ronds Science & Technology's Profit Performance

Arguably, Anhui Ronds Science & Technology's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Anhui Ronds Science & Technology's statutory profits are better than its underlying earnings power. The good news is that, its earnings per share increased by 37% in the last year. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. Obviously, we love to consider the historical data to inform our opinion of a company. But it can be really valuable to consider what other analysts are forecasting. Luckily, you can check out what analysts are forecasting by clicking here.

This note has only looked at a single factor that sheds light on the nature of Anhui Ronds Science & Technology'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.