FAWER Automotive Parts Limited Company's (SZSE:000030) healthy profit numbers didn't contain any surprises for investors. However the statutory profit number doesn't tell the whole story, and we have found some factors which might be of concern to shareholders.

The Impact Of Unusual Items On Profit

For anyone who wants to understand FAWER Automotive Parts Limited's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥231m 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. 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. And, after all, that's exactly what the accounting terminology implies. We can see that FAWER Automotive Parts Limited's positive unusual items were quite significant relative to its profit in the year to September 2024. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of FAWER Automotive Parts Limited.

Our Take On FAWER Automotive Parts Limited's Profit Performance

As previously mentioned, FAWER Automotive Parts Limited's large boost from unusual items won't be there indefinitely, so its statutory earnings are probably a poor guide to its underlying profitability. As a result, we think it may well be the case that FAWER Automotive Parts Limited's underlying earnings power is lower than its statutory profit. But at least holders can take some solace from the 7.1% EPS growth in the last year. 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. So while earnings quality is important, it's equally important to consider the risks facing FAWER Automotive Parts Limited at this point in time. To that end, you should learn about the 3 warning signs we've spotted with FAWER Automotive Parts Limited (including 1 which is potentially serious).

Today we've zoomed in on a single data point to better understand the nature of FAWER Automotive Parts Limited'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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.