We Think That There Are More Issues For Luyin Investment GroupLtd (SHSE:600784) Than Just Sluggish Earnings

Luyin Investment Group Co.,Ltd.'s (SHSE:600784) recent weak earnings report didn't cause a big stock movement. However, we believe that investors should be aware of some underlying factors which may be of concern.

View our latest analysis for Luyin Investment GroupLtd

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Luyin Investment GroupLtd's profit received a boost of CN¥29m 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. And that's as you'd expect, given these boosts are described as 'unusual'. 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).

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Luyin Investment GroupLtd.

Our Take On Luyin Investment GroupLtd's Profit Performance

Arguably, Luyin Investment GroupLtd's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Luyin Investment GroupLtd's true underlying earnings power is actually less than its statutory profit. Nonetheless, it's still worth noting that its earnings per share have grown at 26% over the last three years. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. So while earnings quality is important, it's equally important to consider the risks facing Luyin Investment GroupLtd at this point in time. Case in point: We've spotted 1 warning sign for Luyin Investment GroupLtd you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Luyin Investment GroupLtd'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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.

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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.