CRCC High-Tech Equipment Corporation Limited's (HKG:1786) healthy profit numbers didn't contain any surprises for investors. We believe that shareholders have noticed some concerning factors beyond the statutory profit numbers.

The Impact Of Unusual Items On Profit

Importantly, our data indicates that CRCC High-Tech Equipment's profit received a boost of CN¥429m in unusual items, over the last year. 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, after all, that's exactly what the accounting terminology implies. We can see that CRCC High-Tech Equipment's positive unusual items were quite significant relative to its profit in the year to June 2024. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of CRCC High-Tech Equipment.

Our Take On CRCC High-Tech Equipment's Profit Performance

As we discussed above, we think the significant positive unusual item makes CRCC High-Tech Equipment's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that CRCC High-Tech Equipment's underlying earnings power is lower than its statutory profit. But the good news is that its EPS growth over the last three years has been very impressive. 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. So while earnings quality is important, it's equally important to consider the risks facing CRCC High-Tech Equipment at this point in time. At Simply Wall St, we found 2 warning signs for CRCC High-Tech Equipment and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of CRCC High-Tech Equipment'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.

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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.