Why Shenzhen Fenda Technology's (SZSE:002681) Shaky Earnings Are Just The Beginning Of Its Problems

The subdued market reaction suggests that Shenzhen Fenda Technology Co., Ltd.'s (SZSE:002681) recent earnings didn't contain any surprises. However, we believe that investors should be aware of some underlying factors which may be of concern.

Check out our latest analysis for Shenzhen Fenda Technology

The Impact Of Unusual Items On Profit

For anyone who wants to understand Shenzhen Fenda Technology's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥105m 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 that's as you'd expect, given these boosts are described as 'unusual'. Shenzhen Fenda Technology 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 Shenzhen Fenda Technology.

Our Take On Shenzhen Fenda Technology's Profit Performance

As we discussed above, we think the significant positive unusual item makes Shenzhen Fenda Technology's earnings a poor guide to its underlying profitability. For this reason, we think that Shenzhen Fenda Technology's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. 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'd like to know more about Shenzhen Fenda Technology as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 3 warning signs for Shenzhen Fenda Technology you should know about.

This note has only looked at a single factor that sheds light on the nature of Shenzhen Fenda Technology's profit. But there are plenty of other ways to inform your opinion of a company. 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.