Zhejiang Fuchunjiang Environmental ThermoelectricLTD's (SZSE:002479) Problems Go Beyond Weak Profit

A lackluster earnings announcement from Zhejiang Fuchunjiang Environmental Thermoelectric Co.,LTD. (SZSE:002479) last week didn't sink the stock price. We think that investors are worried about some weaknesses underlying the earnings.

See our latest analysis for Zhejiang Fuchunjiang Environmental ThermoelectricLTD

The Impact Of Unusual Items On Profit

To properly understand Zhejiang Fuchunjiang Environmental ThermoelectricLTD's profit results, we need to consider the CN¥75m 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 that's as you'd expect, given these boosts are described as 'unusual'. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Zhejiang Fuchunjiang Environmental ThermoelectricLTD.

Our Take On Zhejiang Fuchunjiang Environmental ThermoelectricLTD's Profit Performance

Arguably, Zhejiang Fuchunjiang Environmental ThermoelectricLTD's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Zhejiang Fuchunjiang Environmental ThermoelectricLTD's true underlying earnings power is actually less than its statutory profit. Sadly, its EPS was down over the last twelve months. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. At Simply Wall St, we found 3 warning signs for Zhejiang Fuchunjiang Environmental ThermoelectricLTD and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of Zhejiang Fuchunjiang Environmental ThermoelectricLTD's profit. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. 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.