Shenzhen Intelligent Precision Instrument's (SZSE:301512) Shareholders Have More To Worry About Than Only Soft Earnings

Last week's earnings announcement from Shenzhen Intelligent Precision Instrument Co., Ltd. (SZSE:301512) 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 Shenzhen Intelligent Precision Instrument

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Shenzhen Intelligent Precision Instrument's profit received a boost of CN¥5.6m in unusual items, over the last year. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. 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).

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Shenzhen Intelligent Precision Instrument.

Our Take On Shenzhen Intelligent Precision Instrument's Profit Performance

Arguably, Shenzhen Intelligent Precision Instrument's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Shenzhen Intelligent Precision Instrument's true underlying earnings power is actually less than its statutory profit. In further bad news, its earnings per share decreased in the last year. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. In terms of investment risks, we've identified 1 warning sign with Shenzhen Intelligent Precision Instrument, and understanding it should be part of your investment process.

Today we've zoomed in on a single data point to better understand the nature of Shenzhen Intelligent Precision Instrument'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.

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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.