AVE Science&TechnologyLTD's (SHSE:688067) Earnings Are Weaker Than They Seem

Unsurprisingly, AVE Science&Technology CO.,LTD's (SHSE:688067) stock price was strong on the back of its healthy earnings report. However, our analysis suggests that shareholders may be missing some factors that indicate the earnings result was not as good as it looked.

Check out our latest analysis for AVE Science&TechnologyLTD

How Do Unusual Items Influence Profit?

Importantly, our data indicates that AVE Science&TechnologyLTD's profit received a boost of CN¥4.1m in unusual items, over the last year. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. Which is hardly surprising, given the name. We can see that AVE Science&TechnologyLTD's positive unusual items were quite significant relative to its profit in the year to June 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 AVE Science&TechnologyLTD.

Our Take On AVE Science&TechnologyLTD's Profit Performance

As we discussed above, we think the significant positive unusual item makes AVE Science&TechnologyLTD's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that AVE Science&TechnologyLTD's underlying earnings power is lower than its statutory profit. The good news is that, its earnings per share increased by 58% in the last year. 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. Our analysis shows 2 warning signs for AVE Science&TechnologyLTD (1 can't be ignored!) and we strongly recommend you look at these bad boys before investing.

Today we've zoomed in on a single data point to better understand the nature of AVE Science&TechnologyLTD'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. 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.