Guangdong Lvtong New Energy Electric Vehicle Technology's (SZSE:301322) Problems Go Beyond Weak Profit

A lackluster earnings announcement from Guangdong Lvtong New Energy Electric Vehicle Technology Co., LTD (SZSE:301322) last week didn't sink the stock price. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

View our latest analysis for Guangdong Lvtong New Energy Electric Vehicle Technology

The Impact Of Unusual Items On Profit

For anyone who wants to understand Guangdong Lvtong New Energy Electric Vehicle Technology's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥30m worth of unusual items. 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. If Guangdong Lvtong New Energy Electric Vehicle Technology 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 Guangdong Lvtong New Energy Electric Vehicle Technology.

Our Take On Guangdong Lvtong New Energy Electric Vehicle Technology's Profit Performance

Arguably, Guangdong Lvtong New Energy Electric Vehicle Technology's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Guangdong Lvtong New Energy Electric Vehicle Technology's true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 26% per annum growth in EPS for the last three. 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 Guangdong Lvtong New Energy Electric Vehicle Technology's balance sheet health here.

This note has only looked at a single factor that sheds light on the nature of Guangdong Lvtong New Energy Electric Vehicle 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 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.