Investors Can Find Comfort In Cosonic Intelligent Technologies' (SZSE:300793) Earnings Quality

Soft earnings didn't appear to concern Cosonic Intelligent Technologies Co., Ltd.'s (SZSE:300793) shareholders over the last week. We did some digging, and we believe the earnings are stronger than they seem.

Check out our latest analysis for Cosonic Intelligent Technologies

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Cosonic Intelligent Technologies' profit was reduced by CN¥51m, due to unusual items, over the last year. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. If Cosonic Intelligent Technologies doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

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

Our Take On Cosonic Intelligent Technologies' Profit Performance

Unusual items (expenses) detracted from Cosonic Intelligent Technologies' earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Cosonic Intelligent Technologies' statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at 37% per year over the last three years. 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. 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 3 warning signs with Cosonic Intelligent Technologies, and understanding these should be part of your investment process.

Today we've zoomed in on a single data point to better understand the nature of Cosonic Intelligent Technologies' profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.