We Think That There Are More Issues For Suzhou Mingzhi Technology (SHSE:688355) Than Just Sluggish Earnings

Last week's earnings announcement from Suzhou Mingzhi Technology Co., Ltd. (SHSE:688355) was disappointing to investors, with a sluggish profit figure. Our analysis has found some reasons to be concerned, beyond the weak headline numbers.

View our latest analysis for Suzhou Mingzhi Technology

How Do Unusual Items Influence Profit?

For anyone who wants to understand Suzhou Mingzhi Technology's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥17m worth of 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'. Suzhou Mingzhi Technology had a rather significant contribution from unusual items relative to its profit to December 2023. 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 Suzhou Mingzhi Technology.

Our Take On Suzhou Mingzhi Technology's Profit Performance

As we discussed above, we think the significant positive unusual item makes Suzhou Mingzhi Technology's earnings a poor guide to its underlying profitability. For this reason, we think that Suzhou Mingzhi Technology's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. In further bad news, its earnings per share decreased in the last year. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example, Suzhou Mingzhi Technology has 5 warning signs (and 2 which are significant) we think you should know about.

This note has only looked at a single factor that sheds light on the nature of Suzhou Mingzhi Technology'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. 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 that insiders are buying 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.