Despite China Northern Rare Earth (Group) High-Tech Co.,Ltd's (SHSE:600111) recent earnings report having lackluster headline numbers, the market responded positively. We think that shareholders might be missing some concerning factors that our analysis found.

The Impact Of Unusual Items On Profit

For anyone who wants to understand China Northern Rare Earth (Group) High-TechLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥210m worth of unusual items. 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. If China Northern Rare Earth (Group) High-TechLtd 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 China Northern Rare Earth (Group) High-TechLtd's Profit Performance

Arguably, China Northern Rare Earth (Group) High-TechLtd's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that China Northern Rare Earth (Group) High-TechLtd's true underlying earnings power is actually less than its statutory profit. Sadly, its EPS was down over 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. If you want to do dive deeper into China Northern Rare Earth (Group) High-TechLtd, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 1 warning sign for China Northern Rare Earth (Group) High-TechLtd you should know about.

Today we've zoomed in on a single data point to better understand the nature of China Northern Rare Earth (Group) High-TechLtd'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 with significant insider holdings 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.