Earnings Troubles May Signal Larger Issues for Jiangsu Jinling Sports EquipmentLtd (SZSE:300651) Shareholders

A lackluster earnings announcement from Jiangsu Jinling Sports Equipment Co.,Ltd. (SZSE:300651) last week didn't sink the stock price. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

View our latest analysis for Jiangsu Jinling Sports EquipmentLtd

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Jiangsu Jinling Sports EquipmentLtd's profit received a boost of CN¥6.5m in unusual items, over the last year. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. 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'. We can see that Jiangsu Jinling Sports EquipmentLtd's positive unusual items were quite significant relative to its profit in the year to September 2024. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Jiangsu Jinling Sports EquipmentLtd.

Our Take On Jiangsu Jinling Sports EquipmentLtd's Profit Performance

As previously mentioned, Jiangsu Jinling Sports EquipmentLtd's large boost from unusual items won't be there indefinitely, so its statutory earnings are probably a poor guide to its underlying profitability. As a result, we think it may well be the case that Jiangsu Jinling Sports EquipmentLtd's underlying earnings power is lower than its statutory profit. But the good news is that its EPS growth over the last three years has been very impressive. 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 Jiangsu Jinling Sports EquipmentLtd as a business, it's important to be aware of any risks it's facing. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Jiangsu Jinling Sports EquipmentLtd.

Today we've zoomed in on a single data point to better understand the nature of Jiangsu Jinling Sports EquipmentLtd'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 with high insider ownership.

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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.