Despite posting some strong earnings, the market for TKD Science and Technology Co.,Ltd.'s (SHSE:603738) stock hasn't moved much. Our analysis suggests that shareholders have noticed something concerning in the numbers.
How Do Unusual Items Influence Profit?
For anyone who wants to understand TKD Science and TechnologyLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥11m 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 analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. Which is hardly surprising, given the name. If TKD Science and TechnologyLtd doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of TKD Science and TechnologyLtd.
Our Take On TKD Science and TechnologyLtd's Profit Performance
Arguably, TKD Science and TechnologyLtd's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that TKD Science and TechnologyLtd's true underlying earnings power is actually less than its statutory profit. The good news is that, its earnings per share increased by 38% 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. Just as investors must consider earnings, it is also important to take into account the strength of a company's balance sheet. You can see our latest analysis on TKD Science and TechnologyLtd's balance sheet health here.
Today we've zoomed in on a single data point to better understand the nature of TKD Science and TechnologyLtd'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.