Create Technology & ScienceLtd's (SZSE:000551) Anemic Earnings Might Be Worse Than You Think

The subdued market reaction suggests that Create Technology & Science Co.,Ltd.'s (SZSE:000551) recent earnings didn't contain any surprises. We think that investors are worried about some weaknesses underlying the earnings.

View our latest analysis for Create Technology & ScienceLtd

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Create Technology & ScienceLtd's profit received a boost of CN¥18m in unusual items, over the last year. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And that's as you'd expect, given these boosts are described as 'unusual'. If Create Technology & ScienceLtd 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 Create Technology & ScienceLtd.

Our Take On Create Technology & ScienceLtd's Profit Performance

Arguably, Create Technology & ScienceLtd's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Create Technology & ScienceLtd's statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 33% 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. At Simply Wall St, we found 1 warning sign for Create Technology & ScienceLtd and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of Create Technology & ScienceLtd's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.