Sichuan Jiuzhou Electronic's (SZSE:000801) Sluggish Earnings Might Be Just The Beginning Of Its Problems

The market wasn't impressed with the soft earnings from Sichuan Jiuzhou Electronic Co., Ltd. (SZSE:000801) recently. Our analysis has found some reasons to be concerned, beyond the weak headline numbers.

View our latest analysis for Sichuan Jiuzhou Electronic

How Do Unusual Items Influence Profit?

For anyone who wants to understand Sichuan Jiuzhou Electronic's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥53m worth of 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. 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. Sichuan Jiuzhou Electronic had a rather significant contribution from unusual items relative to its profit to September 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 Sichuan Jiuzhou Electronic.

Our Take On Sichuan Jiuzhou Electronic's Profit Performance

As we discussed above, we think the significant positive unusual item makes Sichuan Jiuzhou Electronic's earnings a poor guide to its underlying profitability. For this reason, we think that Sichuan Jiuzhou Electronic's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. But at least holders can take some solace from the 34% per annum growth in EPS for the last three. 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. If you want to do dive deeper into Sichuan Jiuzhou Electronic, you'd also look into what risks it is currently facing. In terms of investment risks, we've identified 2 warning signs with Sichuan Jiuzhou Electronic, and understanding these bad boys should be part of your investment process.

Today we've zoomed in on a single data point to better understand the nature of Sichuan Jiuzhou Electronic's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. 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.