Zhejiang Xinzhonggang Thermal Power's (SHSE:605162) Shareholders May Want To Dig Deeper Than Statutory Profit

Zhejiang Xinzhonggang Thermal Power Co., LTD.'s (SHSE:605162) healthy profit numbers didn't contain any surprises for investors. We think this is due to investors looking beyond the statutory profits and being concerned with what they see.

View our latest analysis for Zhejiang Xinzhonggang Thermal Power

The Impact Of Unusual Items On Profit

To properly understand Zhejiang Xinzhonggang Thermal Power's profit results, we need to consider the CN¥29m gain attributed to 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 Zhejiang Xinzhonggang Thermal Power 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 Zhejiang Xinzhonggang Thermal Power.

Our Take On Zhejiang Xinzhonggang Thermal Power's Profit Performance

Arguably, Zhejiang Xinzhonggang Thermal Power's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Zhejiang Xinzhonggang Thermal Power's statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 45% EPS growth 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Case in point: We've spotted 2 warning signs for Zhejiang Xinzhonggang Thermal Power you should be mindful of and 1 of these bad boys doesn't sit too well with us.

This note has only looked at a single factor that sheds light on the nature of Zhejiang Xinzhonggang Thermal Power'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.