Shandong Golden Empire Precision Machinery Technology (SHSE:603270) Strong Profits May Be Masking Some Underlying Issues

The recent earnings posted by Shandong Golden Empire Precision Machinery Technology Co., Ltd. (SHSE:603270) were solid, but the stock didn't move as much as we expected. However the statutory profit number doesn't tell the whole story, and we have found some factors which might be of concern to shareholders.

See our latest analysis for Shandong Golden Empire Precision Machinery Technology

How Do Unusual Items Influence Profit?

To properly understand Shandong Golden Empire Precision Machinery Technology's profit results, we need to consider the CN¥34m gain attributed to 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. Shandong Golden Empire Precision Machinery Technology had a rather significant contribution from unusual items relative to its profit to March 2024. 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 Golden Empire Precision Machinery Technology.

Our Take On Shandong Golden Empire Precision Machinery Technology's Profit Performance

As previously mentioned, Shandong Golden Empire Precision Machinery Technology's large boost from unusual items won't be there indefinitely, so its statutory earnings are probably a poor guide to its underlying profitability. As a result, we think it may well be the case that Shandong Golden Empire Precision Machinery Technology's underlying earnings power is lower than its statutory profit. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example - Shandong Golden Empire Precision Machinery Technology has 2 warning signs we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Shandong Golden Empire Precision Machinery Technology'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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.

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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.