Shareholders appeared to be happy with Zhejiang Kaier New Materials Co.,Ltd.'s (SZSE:300234) solid earnings report last week. Looking deeper at the numbers, we found several encouraging factors beyond the headline profit numbers.
The Impact Of Unusual Items On Profit
For anyone who wants to understand Zhejiang Kaier New MaterialsLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥9.1m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. If Zhejiang Kaier New MaterialsLtd doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Zhejiang Kaier New MaterialsLtd.
Our Take On Zhejiang Kaier New MaterialsLtd's Profit Performance
Because unusual items detracted from Zhejiang Kaier New MaterialsLtd's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Zhejiang Kaier New MaterialsLtd's earnings potential is at least as good as it seems, and maybe even better! 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example - Zhejiang Kaier New MaterialsLtd has 1 warning sign we think you should be aware of.
This note has only looked at a single factor that sheds light on the nature of Zhejiang Kaier New MaterialsLtd'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.