We Think That There Are Issues Underlying Sijin Intelligent Forming Machinery's (SZSE:003025) Earnings

Investors were disappointed with Sijin Intelligent Forming Machinery Co., Ltd.'s (SZSE:003025) earnings, despite the strong profit numbers. We did some digging and found some worrying underlying problems.

Check out our latest analysis for Sijin Intelligent Forming Machinery

The Impact Of Unusual Items On Profit

To properly understand Sijin Intelligent Forming Machinery's profit results, we need to consider the CN¥65m gain attributed to unusual items. 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. Which is hardly surprising, given the name. Sijin Intelligent Forming Machinery had a rather significant contribution from unusual items relative to its profit 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 Sijin Intelligent Forming Machinery.

Our Take On Sijin Intelligent Forming Machinery's Profit Performance

As previously mentioned, Sijin Intelligent Forming Machinery'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 Sijin Intelligent Forming Machinery's underlying earnings power is lower than its statutory profit. The silver lining is that its EPS growth over the last year has been really wonderful, even if it's not a perfect measure. 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. Case in point: We've spotted 2 warning signs for Sijin Intelligent Forming Machinery you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Sijin Intelligent Forming Machinery'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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.