Solid Earnings May Not Tell The Whole Story For Hangzhou IECHO Science&Technology (SHSE:688092)

Hangzhou IECHO Science&Technology Co., Ltd.'s (SHSE:688092 ) stock didn't jump after it announced some healthy earnings. Our analysis showed that there are some concerning factors in the earnings that investors may be cautious of.

Check out our latest analysis for Hangzhou IECHO Science&Technology

The Impact Of Unusual Items On Profit

To properly understand Hangzhou IECHO Science&Technology's profit results, we need to consider the CN¥8.1m gain attributed to unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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 items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Hangzhou IECHO Science&Technology.

Our Take On Hangzhou IECHO Science&Technology's Profit Performance

We'd posit that Hangzhou IECHO Science&Technology's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that Hangzhou IECHO Science&Technology's true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 5.5% per annum growth in EPS for the last three. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. So while earnings quality is important, it's equally important to consider the risks facing Hangzhou IECHO Science&Technology at this point in time. Every company has risks, and we've spotted 1 warning sign for Hangzhou IECHO Science&Technology you should know about.

Today we've zoomed in on a single data point to better understand the nature of Hangzhou IECHO Science&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.