Wenling Zhejiang Measuring and Cutting Tools Trading Centre (HKG:1379) Is Posting Promising Earnings But The Good News Doesn’t Stop There

Wenling Zhejiang Measuring and Cutting Tools Trading Centre Company Limited's (HKG:1379) solid earnings announcement recently didn't do much to the stock price. Our analysis suggests that shareholders might be missing some positive underlying factors in the earnings report.

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The Impact Of Unusual Items On Profit

Importantly, our data indicates that Wenling Zhejiang Measuring and Cutting Tools Trading Centre's profit was reduced by CN¥17m, due to unusual items, over the last year. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect Wenling Zhejiang Measuring and Cutting Tools Trading Centre 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 Wenling Zhejiang Measuring and Cutting Tools Trading Centre.

Our Take On Wenling Zhejiang Measuring and Cutting Tools Trading Centre's Profit Performance

Unusual items (expenses) detracted from Wenling Zhejiang Measuring and Cutting Tools Trading Centre's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Wenling Zhejiang Measuring and Cutting Tools Trading Centre's statutory profit actually understates its earnings potential! And on top of that, its earnings per share increased by 29% 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Case in point: We've spotted 4 warning signs for Wenling Zhejiang Measuring and Cutting Tools Trading Centre you should be mindful of and 2 of these make us uncomfortable.

This note has only looked at a single factor that sheds light on the nature of Wenling Zhejiang Measuring and Cutting Tools Trading Centre'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 with high insider ownership.

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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.