Unsurprisingly, HMT (Xiamen) New Technical Materials Co., Ltd's (SHSE:603306) stock price was strong on the back of its healthy earnings report. We did some analysis and think that investors are missing some details hidden beneath the profit numbers.

How Do Unusual Items Influence Profit?

For anyone who wants to understand HMT (Xiamen) New Technical Materials' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥38m 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. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And, after all, that's exactly what the accounting terminology implies. If HMT (Xiamen) New Technical Materials 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 HMT (Xiamen) New Technical Materials' Profit Performance

We'd posit that HMT (Xiamen) New Technical Materials' statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that HMT (Xiamen) New Technical Materials' true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 38% per annum growth in EPS for the last three. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. 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 HMT (Xiamen) New Technical Materials and we think they deserve your attention.

This note has only looked at a single factor that sheds light on the nature of HMT (Xiamen) New Technical Materials' 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.