Zhejiang Hengtong Holding Co.,Ltd.'s (SHSE:600226) strong earnings report was rewarded with a positive stock price move. Our analysis found some more factors that we think are good for shareholders.

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Zhejiang Hengtong HoldingLtd's profit was reduced by CN¥13m, due to unusual items, over the last year. 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. Assuming those unusual expenses don't come up again, we'd therefore expect Zhejiang Hengtong HoldingLtd 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 Hengtong HoldingLtd.

Our Take On Zhejiang Hengtong HoldingLtd's Profit Performance

Unusual items (expenses) detracted from Zhejiang Hengtong HoldingLtd's earnings over the last year, but we might see an improvement next year. Because of this, we think Zhejiang Hengtong HoldingLtd's earnings potential is at least as good as it seems, and maybe even better! And on top of that, its earnings per share increased by 75% in the last year. 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. While earnings are important, another area to consider is the balance sheet. If you're interested we have a graphic representation of Zhejiang Hengtong HoldingLtd's balance sheet.

Today we've zoomed in on a single data point to better understand the nature of Zhejiang Hengtong HoldingLtd's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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. 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.