Sinoma Science & TechnologyLtd's (SZSE:002080) Problems Go Beyond Weak Profit

A lackluster earnings announcement from Sinoma Science & Technology Co.,Ltd. (SZSE:002080) last week didn't sink the stock price. We think that investors are worried about some weaknesses underlying the earnings.

Check out our latest analysis for Sinoma Science & TechnologyLtd

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Sinoma Science & TechnologyLtd's profit received a boost of CN¥1.0b 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. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And that's as you'd expect, given these boosts are described as 'unusual'. We can see that Sinoma Science & TechnologyLtd's positive unusual items were quite significant relative to its profit in the year 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.

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 Sinoma Science & TechnologyLtd's Profit Performance

As we discussed above, we think the significant positive unusual item makes Sinoma Science & TechnologyLtd's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Sinoma Science & TechnologyLtd's underlying earnings power is lower than its statutory profit. Sadly, its EPS was down over the last twelve months. 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 Sinoma Science & TechnologyLtd at this point in time. Every company has risks, and we've spotted 4 warning signs for Sinoma Science & TechnologyLtd you should know about.

This note has only looked at a single factor that sheds light on the nature of Sinoma Science & TechnologyLtd'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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.