Uroica Precision Information EngineeringLtd (SZSE:300099) Strong Profits May Be Masking Some Underlying Issues

Following the solid earnings report from Uroica Precision Information Engineering Co.,Ltd (SZSE:300099), the market responded by bidding up the stock price. While the profit numbers were good, our analysis has found some concerning factors that shareholders should be aware of.

See our latest analysis for Uroica Precision Information EngineeringLtd

How Do Unusual Items Influence Profit?

For anyone who wants to understand Uroica Precision Information EngineeringLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥12m worth of 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. 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).

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On Uroica Precision Information EngineeringLtd's Profit Performance

We'd posit that Uroica Precision Information EngineeringLtd's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that Uroica Precision Information EngineeringLtd's statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 12% 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example - Uroica Precision Information EngineeringLtd has 1 warning sign we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Uroica Precision Information EngineeringLtd's profit. But there are plenty of other ways to inform your opinion of a company. 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.