Hangzhou Gisway Information TechnologyLtd's (SZSE:301390) Anemic Earnings Might Be Worse Than You Think

Last week's earnings announcement from Hangzhou Gisway Information Technology Co.,Ltd. (SZSE:301390) was disappointing to investors, with a sluggish profit figure. We did some further digging and think they have a few more reasons to be concerned beyond the statutory profit.

View our latest analysis for Hangzhou Gisway Information TechnologyLtd

How Do Unusual Items Influence Profit?

For anyone who wants to understand Hangzhou Gisway Information TechnologyLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥7.6m 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. Which is hardly surprising, given the name. 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).

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Hangzhou Gisway Information TechnologyLtd.

Our Take On Hangzhou Gisway Information TechnologyLtd's Profit Performance

We'd posit that Hangzhou Gisway Information TechnologyLtd's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that Hangzhou Gisway Information TechnologyLtd's true underlying earnings power is actually less than its statutory profit. Sadly, its EPS was down over the last twelve months. 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. If you want to do dive deeper into Hangzhou Gisway Information TechnologyLtd, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 2 warning signs for Hangzhou Gisway Information TechnologyLtd you should know about.

This note has only looked at a single factor that sheds light on the nature of Hangzhou Gisway Information TechnologyLtd'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. 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.

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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.