Investors were disappointed by Xiamen R&T Plumbing Technology Co.,Ltd.'s (SZSE:002790 ) latest earnings release. We did some further digging and think they have a few more reasons to be concerned beyond the statutory profit.
The Impact Of Unusual Items On Profit
For anyone who wants to understand Xiamen R&T Plumbing TechnologyLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥13m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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'. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).
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 Xiamen R&T Plumbing TechnologyLtd's Profit Performance
Arguably, Xiamen R&T Plumbing TechnologyLtd's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Xiamen R&T Plumbing TechnologyLtd's statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 12% per annum growth in EPS for the last three. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. At Simply Wall St, we found 2 warning signs for Xiamen R&T Plumbing TechnologyLtd and we think they deserve your attention.
This note has only looked at a single factor that sheds light on the nature of Xiamen R&T Plumbing TechnologyLtd'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. 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
