Ningbo Runhe High-Tech Materials Co., Ltd. (SZSE:300727) just released a solid earnings report, and the stock displayed some strength. Despite this, our analysis suggests that there are some factors weakening the foundations of those good profit numbers.

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Ningbo Runhe High-Tech Materials' profit received a boost of CN¥7.5m in unusual items, over the last year. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. 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. Which is hardly surprising, given the name. 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).

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On Ningbo Runhe High-Tech Materials' Profit Performance

Arguably, Ningbo Runhe High-Tech Materials' statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Ningbo Runhe High-Tech Materials' statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 16% per annum growth in EPS for the last three. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example - Ningbo Runhe High-Tech Materials has 2 warning signs we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Ningbo Runhe High-Tech Materials' 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 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.