Shenzhen Han's CNC Technology's (SZSE:301200) Sluggish Earnings Might Be Just The Beginning Of Its Problems

Last week's earnings announcement from Shenzhen Han's CNC Technology Co., Ltd. (SZSE:301200) was disappointing to investors, with a sluggish profit figure. We did some analysis, and found that there are some reasons to be cautious about the headline numbers.

See our latest analysis for Shenzhen Han's CNC Technology

How Do Unusual Items Influence Profit?

To properly understand Shenzhen Han's CNC Technology's profit results, we need to consider the CN¥39m gain attributed to unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. 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. We can see that Shenzhen Han's CNC Technology's positive unusual items were quite significant relative to its profit in the year to March 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 Shenzhen Han's CNC Technology.

Our Take On Shenzhen Han's CNC Technology's Profit Performance

As we discussed above, we think the significant positive unusual item makes Shenzhen Han's CNC Technology's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Shenzhen Han's CNC Technology's underlying earnings power is lower than its statutory profit. In further bad news, its earnings per share decreased in the last year. 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. For example, Shenzhen Han's CNC Technology has 4 warning signs (and 2 which are a bit unpleasant) we think you should know about.

Today we've zoomed in on a single data point to better understand the nature of Shenzhen Han's CNC Technology's profit. But there are plenty of other ways to inform your opinion of a company. 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.

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.