Statutory Profit Doesn't Reflect How Good Hangzhou CNCR-ITLtd's (SZSE:300250) Earnings Are

When companies post strong earnings, the stock generally performs well, just like Hangzhou CNCR-IT Co.,Ltd's (SZSE:300250) stock has recently. We did some digging and found some further encouraging factors that investors will like.

Check out our latest analysis for Hangzhou CNCR-ITLtd

How Do Unusual Items Influence Profit?

For anyone who wants to understand Hangzhou CNCR-ITLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥4.6m due to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. If Hangzhou CNCR-ITLtd doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Hangzhou CNCR-ITLtd.

Our Take On Hangzhou CNCR-ITLtd's Profit Performance

Because unusual items detracted from Hangzhou CNCR-ITLtd's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Hangzhou CNCR-ITLtd's statutory profit actually understates its earnings potential! And it's also positive that the company showed enough improvement to book a profit this year, after losing money 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. Just as investors must consider earnings, it is also important to take into account the strength of a company's balance sheet. You can see our latest analysis on Hangzhou CNCR-ITLtd's balance sheet health here.

Today we've zoomed in on a single data point to better understand the nature of Hangzhou CNCR-ITLtd'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. 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 that insiders are buying 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.