Shareholders appeared to be happy with Zhejiang Runyang New Material Technology Co., Ltd.'s (SZSE:300920) 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
To properly understand Zhejiang Runyang New Material Technology's profit results, we need to consider the CN¥4.2m expense attributed to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Zhejiang Runyang New Material Technology 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 Zhejiang Runyang New Material Technology.
Our Take On Zhejiang Runyang New Material Technology's Profit Performance
Unusual items (expenses) detracted from Zhejiang Runyang New Material Technology's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Zhejiang Runyang New Material Technology's statutory profit actually understates its earnings potential! And the EPS is up 27% over the last twelve months. 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Case in point: We've spotted 2 warning signs for Zhejiang Runyang New Material Technology you should be aware of.
This note has only looked at a single factor that sheds light on the nature of Zhejiang Runyang New Material Technology's profit. But there are plenty of other ways to inform your opinion of a company. 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.