Why Keysino Separation Technology's (SZSE:300899) Shaky Earnings Are Just The Beginning Of Its Problems

The subdued market reaction suggests that Keysino Separation Technology Inc.'s (SZSE:300899) recent earnings didn't contain any surprises. However, we believe that investors should be aware of some underlying factors which may be of concern.

View our latest analysis for Keysino Separation Technology

The Impact Of Unusual Items On Profit

For anyone who wants to understand Keysino Separation Technology's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥1.2m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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. And, after all, that's exactly what the accounting terminology implies. We can see that Keysino Separation Technology's positive unusual items were quite significant relative to its profit in the year to June 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 Keysino Separation Technology.

Our Take On Keysino Separation Technology's Profit Performance

As we discussed above, we think the significant positive unusual item makes Keysino Separation Technology's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Keysino Separation Technology's underlying earnings power is lower than its statutory profit. In further bad news, its earnings per share decreased 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. To that end, you should learn about the 3 warning signs we've spotted with Keysino Separation Technology (including 2 which are potentially serious).

This note has only looked at a single factor that sheds light on the nature of Keysino Separation Technology'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 with high insider ownership.

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.