Lifan Technology(Group)Co.Ltd's (SHSE:601777) Soft Earnings Don't Show The Whole Picture

Soft earnings didn't appear to concern Lifan Technology(Group)Co.,Ltd.'s (SHSE:601777) shareholders over the last week. We think that the softer headline numbers might be getting counterbalanced by some positive underlying factors.

See our latest analysis for Lifan Technology(Group)Co.Ltd

The Impact Of Unusual Items On Profit

For anyone who wants to understand Lifan Technology(Group)Co.Ltd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥87m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Lifan Technology(Group)Co.Ltd 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 Lifan Technology(Group)Co.Ltd.

Our Take On Lifan Technology(Group)Co.Ltd's Profit Performance

Because unusual items detracted from Lifan Technology(Group)Co.Ltd's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Lifan Technology(Group)Co.Ltd'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. If you'd like to know more about Lifan Technology(Group)Co.Ltd as a business, it's important to be aware of any risks it's facing. At Simply Wall St, we found 3 warning signs for Lifan Technology(Group)Co.Ltd and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of Lifan Technology(Group)Co.Ltd'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.