There May Be Reason For Hope In China Nature Energy Technology Holdings' (HKG:1597) Disappointing Earnings

The market shrugged off the recent earnings report from China Nature Energy Technology Holdings Limited (HKG:1597), despite the profit numbers being soft. Our analysis suggests that investors may have noticed some promising signs beyond the statutory profit figures.

Check out our latest analysis for China Nature Energy Technology Holdings

How Do Unusual Items Influence Profit?

For anyone who wants to understand China Nature Energy Technology Holdings' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥12m 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 that's hardly a surprise given these line items are considered unusual. If China Nature Energy Technology Holdings 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 China Nature Energy Technology Holdings.

Our Take On China Nature Energy Technology Holdings' Profit Performance

Unusual items (expenses) detracted from China Nature Energy Technology Holdings' earnings over the last year, but we might see an improvement next year. Because of this, we think China Nature Energy Technology Holdings' earnings potential is at least as good as it seems, and maybe even better! On the other hand, its EPS actually shrunk in 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. So while earnings quality is important, it's equally important to consider the risks facing China Nature Energy Technology Holdings at this point in time. You'd be interested to know, that we found 3 warning signs for China Nature Energy Technology Holdings and you'll want to know about these.

This note has only looked at a single factor that sheds light on the nature of China Nature Energy Technology Holdings' profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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. 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.
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