Ningbo Orient Wires & Cables Co.,Ltd.'s (SHSE:603606) stock was strong after they recently reported robust earnings. However, we think that shareholders may be missing some concerning details in the numbers.
How Do Unusual Items Influence Profit?
For anyone who wants to understand Ningbo Orient Wires & CablesLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥94m worth of unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. 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 that's as you'd expect, given these boosts are described as 'unusual'. If Ningbo Orient Wires & CablesLtd 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 Ningbo Orient Wires & CablesLtd's Profit Performance
We'd posit that Ningbo Orient Wires & CablesLtd's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that Ningbo Orient Wires & CablesLtd's statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 23% EPS growth in the last year. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. While conducting our analysis, we found that Ningbo Orient Wires & CablesLtd has 1 warning sign and it would be unwise to ignore it.
Today we've zoomed in on a single data point to better understand the nature of Ningbo Orient Wires & CablesLtd'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.