We Think You Should Be Aware Of Some Concerning Factors In Ningbo Zhoushan Port's (SHSE:601018) Earnings

Ningbo Zhoushan Port Company Limited's (SHSE:601018) healthy profit numbers didn't contain any surprises for investors. However the statutory profit number doesn't tell the whole story, and we have found some factors which might be of concern to shareholders.

View our latest analysis for Ningbo Zhoushan Port

How Do Unusual Items Influence Profit?

To properly understand Ningbo Zhoushan Port's profit results, we need to consider the CN¥334m gain attributed to unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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, after all, that's exactly what the accounting terminology implies. If Ningbo Zhoushan Port doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Ningbo Zhoushan Port.

Our Take On Ningbo Zhoushan Port's Profit Performance

Arguably, Ningbo Zhoushan Port's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Ningbo Zhoushan Port's statutory profits are better than its underlying earnings power. The good news is that, its earnings per share increased by 11% in the 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example - Ningbo Zhoushan Port has 1 warning sign we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Ningbo Zhoushan Port'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 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.