Weak Statutory Earnings May Not Tell The Whole Story For SonoScape Medical (SZSE:300633)

SonoScape Medical Corp.'s (SZSE:300633) recent weak earnings report didn't cause a big stock movement. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

See our latest analysis for SonoScape Medical

The Impact Of Unusual Items On Profit

To properly understand SonoScape Medical's profit results, we need to consider the CN¥33m gain attributed to unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On SonoScape Medical's Profit Performance

We'd posit that SonoScape Medical's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that SonoScape Medical's statutory profits are better than its underlying earnings power. But on the bright side, its earnings per share have grown at an extremely impressive rate 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. If you'd like to know more about SonoScape Medical as a business, it's important to be aware of any risks it's facing. You'd be interested to know, that we found 1 warning sign for SonoScape Medical and you'll want to know about it.

This note has only looked at a single factor that sheds light on the nature of SonoScape Medical'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.