Tsaker New Energy Tech's (HKG:1986) Soft Earnings Are Actually Better Than They Appear

The market for Tsaker New Energy Tech Co., Limited's (HKG:1986) shares didn't move much after it posted weak earnings recently. Our analysis suggests that while the profits are soft, the foundations of the business are strong.

Check out our latest analysis for Tsaker New Energy Tech

How Do Unusual Items Influence Profit?

To properly understand Tsaker New Energy Tech's profit results, we need to consider the CN¥29m expense attributed 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. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Tsaker New Energy Tech to produce a higher profit next year, all else being equal.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Tsaker New Energy Tech.

Our Take On Tsaker New Energy Tech's Profit Performance

Unusual items (expenses) detracted from Tsaker New Energy Tech's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Tsaker New Energy Tech's statutory profit actually understates its earnings potential! Unfortunately, though, its earnings per share actually fell back over 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. 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. Case in point: We've spotted 5 warning signs for Tsaker New Energy Tech you should be mindful of and 2 of these bad boys shouldn't be ignored.

This note has only looked at a single factor that sheds light on the nature of Tsaker New Energy Tech's 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. 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 that insiders are buying 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.