Nanjing CIGU TechnologyLTD's (SHSE:688448) Shareholders May Want To Dig Deeper Than Statutory Profit

The market shrugged off Nanjing CIGU Technology Corp.,LTD.'s (SHSE:688448) solid earnings report. Our analysis showed that there are some concerning factors in the earnings that investors may be cautious of.

See our latest analysis for Nanjing CIGU TechnologyLTD

How Do Unusual Items Influence Profit?

For anyone who wants to understand Nanjing CIGU TechnologyLTD's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥14m 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. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. Which is hardly surprising, given the name. We can see that Nanjing CIGU TechnologyLTD's positive unusual items were quite significant relative to its profit in the year to September 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 Nanjing CIGU TechnologyLTD.

Our Take On Nanjing CIGU TechnologyLTD's Profit Performance

As previously mentioned, Nanjing CIGU TechnologyLTD'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 Nanjing CIGU TechnologyLTD's underlying earnings power is lower than its statutory profit. But at least holders can take some solace from the 6.5% EPS growth in the last year. 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 Nanjing CIGU TechnologyLTD as a business, it's important to be aware of any risks it's facing. Be aware that Nanjing CIGU TechnologyLTD is showing 3 warning signs in our investment analysis and 2 of those make us uncomfortable...

Today we've zoomed in on a single data point to better understand the nature of Nanjing CIGU TechnologyLTD'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. 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.