Shanghai Feilo AcousticsLtd's (SHSE:600651) Profits Appear To Have Quality Issues

The market for Shanghai Feilo Acoustics Co.,Ltd's (SHSE:600651) stock was strong after it released a healthy earnings report last week. However, we think that shareholders should be cautious as we found some worrying factors underlying the profit.

View our latest analysis for Shanghai Feilo AcousticsLtd

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Shanghai Feilo AcousticsLtd's profit received a boost of CN¥48m in unusual items, over the last year. 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 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. Which is hardly surprising, given the name. Shanghai Feilo AcousticsLtd had a rather significant contribution from unusual items relative to its profit to September 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 Feilo AcousticsLtd.

Our Take On Shanghai Feilo AcousticsLtd's Profit Performance

As we discussed above, we think the significant positive unusual item makes Shanghai Feilo AcousticsLtd's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Shanghai Feilo AcousticsLtd's underlying earnings power is lower than its statutory profit. The silver lining is that its EPS growth over the last year has been really wonderful, even if it's not a perfect measure. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. If you'd like to know more about Shanghai Feilo AcousticsLtd 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 Shanghai Feilo AcousticsLtd and you'll want to know about this.

Today we've zoomed in on a single data point to better understand the nature of Shanghai Feilo AcousticsLtd's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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. 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.