Ningbo Ocean Shipping's (SHSE:601022) Weak Earnings May Only Reveal A Part Of The Whole Picture

The subdued market reaction suggests that Ningbo Ocean Shipping Co., Ltd.'s (SHSE:601022) recent earnings didn't contain any surprises. We think that investors are worried about some weaknesses underlying the earnings.

See our latest analysis for Ningbo Ocean Shipping

How Do Unusual Items Influence Profit?

For anyone who wants to understand Ningbo Ocean Shipping's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥56m worth of 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 analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's as you'd expect, given these boosts are described as 'unusual'. If Ningbo Ocean Shipping 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 Ocean Shipping.

Our Take On Ningbo Ocean Shipping's Profit Performance

Arguably, Ningbo Ocean Shipping's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Ningbo Ocean Shipping's true underlying earnings power is actually less than its statutory profit. Nonetheless, it's still worth noting that its earnings per share have grown at 15% over the last three years. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Ningbo Ocean Shipping.

Today we've zoomed in on a single data point to better understand the nature of Ningbo Ocean Shipping's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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 that insiders are buying.

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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.