We Think That There Are More Issues For Sinomach Precision Industry Group (SZSE:002046) Than Just Sluggish Earnings

Last week's earnings announcement from Sinomach Precision Industry Group Co., Ltd. (SZSE:002046) was disappointing to investors, with a sluggish profit figure. Our analysis has found some reasons to be concerned, beyond the weak headline numbers.

View our latest analysis for Sinomach Precision Industry Group

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Sinomach Precision Industry Group's profit received a boost of CN¥144m in unusual items, over the last year. 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. And that's as you'd expect, given these boosts are described as 'unusual'. Sinomach Precision Industry Group had a rather significant contribution from unusual items relative to its profit to September 2024. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Sinomach Precision Industry Group.

Our Take On Sinomach Precision Industry Group's Profit Performance

As we discussed above, we think the significant positive unusual item makes Sinomach Precision Industry Group's earnings a poor guide to its underlying profitability. For this reason, we think that Sinomach Precision Industry Group's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. But at least holders can take some solace from the 22% per annum growth in EPS for the last three. 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. If you'd like to know more about Sinomach Precision Industry Group as a business, it's important to be aware of any risks it's facing. You'd be interested to know, that we found 2 warning signs for Sinomach Precision Industry Group and you'll want to know about them.

Today we've zoomed in on a single data point to better understand the nature of Sinomach Precision Industry Group'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.