Shenzhen Ysstech Info-Tech Co.,Ltd's (SZSE:300377) recent soft profit numbers didn't appear to worry shareholders, as the stock price showed strength. We think that investors might be looking at some positive factors beyond the earnings numbers.
How Do Unusual Items Influence Profit?
Importantly, our data indicates that Shenzhen Ysstech Info-TechLtd's profit was reduced by CN¥21m, due to unusual items, over the last year. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect Shenzhen Ysstech Info-TechLtd to produce a higher profit next year, all else being equal.
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Shenzhen Ysstech Info-TechLtd.
Our Take On Shenzhen Ysstech Info-TechLtd's Profit Performance
Unusual items (expenses) detracted from Shenzhen Ysstech Info-TechLtd's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Shenzhen Ysstech Info-TechLtd's statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in the last twelve months. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example, we've found that Shenzhen Ysstech Info-TechLtd has 3 warning signs (2 shouldn't be ignored!) that deserve your attention before going any further with your analysis.
Today we've zoomed in on a single data point to better understand the nature of Shenzhen Ysstech Info-TechLtd's profit. But there are plenty of other ways to inform your opinion of a company. 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.
