Despite Hunan Yuneng New Energy Battery Material Co.,Ltd.'s (SZSE:301358) recent earnings report having lackluster headline numbers, the market responded positively. While shareholders may be willing to overlook soft profit numbers, we believe that they should also be taking into account some other factors which may be cause for concern.

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Hunan Yuneng New Energy Battery MaterialLtd's profit received a boost of CN¥68m 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 analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's as you'd expect, given these boosts are described as 'unusual'. If Hunan Yuneng New Energy Battery MaterialLtd doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

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 Hunan Yuneng New Energy Battery MaterialLtd's Profit Performance

We'd posit that Hunan Yuneng New Energy Battery MaterialLtd's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that Hunan Yuneng New Energy Battery MaterialLtd's statutory profits are better than its underlying earnings power. In further bad news, its earnings per share decreased in the last year. 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. If you'd like to know more about Hunan Yuneng New Energy Battery MaterialLtd as a business, it's important to be aware of any risks it's facing. At Simply Wall St, we found 2 warning signs for Hunan Yuneng New Energy Battery MaterialLtd and we think they deserve your attention.

This note has only looked at a single factor that sheds light on the nature of Hunan Yuneng New Energy Battery MaterialLtd's profit. But there are plenty of other ways to inform your opinion of a company. 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.