Longmaster Information & Technology's (SZSE:300288) Anemic Earnings Might Be Worse Than You Think

Investors were disappointed by Longmaster Information & Technology Co., Ltd.'s (SZSE:300288 ) latest earnings release. Our analysis has found some reasons to be concerned, beyond the weak headline numbers.

See our latest analysis for Longmaster Information & Technology

The Impact Of Unusual Items On Profit

To properly understand Longmaster Information & Technology's profit results, we need to consider the CN¥3.8m 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 analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's as you'd expect, given these boosts are described as 'unusual'. If Longmaster Information & Technology doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Longmaster Information & Technology.

Our Take On Longmaster Information & Technology's Profit Performance

Arguably, Longmaster Information & Technology's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Longmaster Information & Technology's statutory profits are better than its underlying earnings power. 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. While it's very important to consider the profit and loss statement, you can also learn a lot about a company by looking at its balance sheet. You can see our latest analysis on Longmaster Information & Technology's balance sheet health here.

Today we've zoomed in on a single data point to better understand the nature of Longmaster Information & Technology'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.