Shandong New Beiyang Information Technology Co., Ltd.'s (SZSE:002376) recent weak earnings report didn't cause a big stock movement. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

Check out our latest analysis for Shandong New Beiyang Information Technology

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Shandong New Beiyang Information Technology's profit received a boost of CN¥19m in unusual items, over the last year. 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. Which is hardly surprising, given the name. Shandong New Beiyang Information Technology had a rather significant contribution from unusual items relative to its profit to March 2022. 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 Shandong New Beiyang Information Technology.

Our Take On Shandong New Beiyang Information Technology's Profit Performance

As we discussed above, we think the significant positive unusual item makes Shandong New Beiyang Information Technology's earnings a poor guide to its underlying profitability. For this reason, we think that Shandong New Beiyang Information Technology's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. Sadly, its EPS was down over the last twelve months. 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. If you'd like to know more about Shandong New Beiyang Information Technology as a business, it's important to be aware of any risks it's facing. For instance, we've identified 5 warning signs for Shandong New Beiyang Information Technology (2 are significant) you should be familiar with.

This note has only looked at a single factor that sheds light on the nature of Shandong New Beiyang Information Technology'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.