Weak Statutory Earnings May Not Tell The Whole Story For Assure Tech (Hangzhou) (SHSE:688075)

The subdued market reaction suggests that Assure Tech (Hangzhou) Co., Ltd.'s (SHSE:688075) recent earnings didn't contain any surprises. However, we believe that investors should be aware of some underlying factors which may be of concern.

See our latest analysis for Assure Tech (Hangzhou)

The Impact Of Unusual Items On Profit

To properly understand Assure Tech (Hangzhou)'s profit results, we need to consider the CN¥2.8m gain attributed to unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And that's as you'd expect, given these boosts are described as 'unusual'. Assure Tech (Hangzhou) 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 Assure Tech (Hangzhou).

Our Take On Assure Tech (Hangzhou)'s Profit Performance

As we discussed above, we think the significant positive unusual item makes Assure Tech (Hangzhou)'s earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Assure Tech (Hangzhou)'s underlying earnings power is lower than its statutory profit. In further bad news, its earnings per share decreased 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. If you want to do dive deeper into Assure Tech (Hangzhou), you'd also look into what risks it is currently facing. Case in point: We've spotted 3 warning signs for Assure Tech (Hangzhou) you should be mindful of and 1 of these bad boys can't be ignored.

Today we've zoomed in on a single data point to better understand the nature of Assure Tech (Hangzhou)'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 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.