Feiyu Technology International Company Ltd.'s (HKG:1022) stock was strong after they recently reported robust earnings. However, we think that shareholders may be missing some concerning details in the numbers.

The Impact Of Unusual Items On Profit

To properly understand Feiyu Technology International's profit results, we need to consider the CN¥4.4m gain attributed to 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. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. Which is hardly surprising, given the name. 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).

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Feiyu Technology International.

Our Take On Feiyu Technology International's Profit Performance

Arguably, Feiyu Technology International's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Feiyu Technology International's statutory profits are better than its underlying earnings power. The good news is that it earned a profit in the last twelve months, despite its previous loss. 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. If you want to do dive deeper into Feiyu Technology International, you'd also look into what risks it is currently facing. In terms of investment risks, we've identified 1 warning sign with Feiyu Technology International, and understanding this should be part of your investment process.

Today we've zoomed in on a single data point to better understand the nature of Feiyu Technology International'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 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.