We Think You Should Be Aware Of Some Concerning Factors In Shanghai Lonyer Data's (SHSE:603003) Earnings

The recent earnings posted by Shanghai Lonyer Data Co., Ltd. (SHSE:603003) were solid, but the stock didn't move as much as we expected. We believe that shareholders have noticed some concerning factors beyond the statutory profit numbers.

Check out our latest analysis for Shanghai Lonyer Data

How Do Unusual Items Influence Profit?

For anyone who wants to understand Shanghai Lonyer Data's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥9.5m worth of unusual items. 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 that's as you'd expect, given these boosts are described as 'unusual'. Shanghai Lonyer Data had a rather significant contribution from unusual items relative to its profit to March 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 Shanghai Lonyer Data.

Our Take On Shanghai Lonyer Data's Profit Performance

As we discussed above, we think the significant positive unusual item makes Shanghai Lonyer Data's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Shanghai Lonyer Data's underlying earnings power is lower than its statutory profit. But at least holders can take some solace from the 41% EPS growth 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. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Shanghai Lonyer Data.

This note has only looked at a single factor that sheds light on the nature of Shanghai Lonyer Data'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. 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 that insiders are buying 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.