Investors Can Find Comfort In Suzhou New District Hi-Tech IndustrialLtd's (SHSE:600736) Earnings Quality

Suzhou New District Hi-Tech Industrial Co.,Ltd's (SHSE:600736) recent soft profit numbers didn't appear to worry shareholders, as the stock price showed strength. However, we think the company is showing some signs that things are more promising than they seem.

View our latest analysis for Suzhou New District Hi-Tech IndustrialLtd

How Do Unusual Items Influence Profit?

For anyone who wants to understand Suzhou New District Hi-Tech IndustrialLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥182m due to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. 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. In the twelve months to September 2024, Suzhou New District Hi-Tech IndustrialLtd had a big unusual items expense. As a result, we can surmise that the unusual items made its statutory profit significantly weaker 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 New District Hi-Tech IndustrialLtd.

Our Take On Suzhou New District Hi-Tech IndustrialLtd's Profit Performance

As we discussed above, we think the significant unusual expense will make Suzhou New District Hi-Tech IndustrialLtd's statutory profit lower than it would otherwise have been. Because of this, we think Suzhou New District Hi-Tech IndustrialLtd's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! On the other hand, its EPS actually shrunk in 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 Suzhou New District Hi-Tech IndustrialLtd at this point in time. Every company has risks, and we've spotted 4 warning signs for Suzhou New District Hi-Tech IndustrialLtd (of which 2 are a bit unpleasant!) you should know about.

Today we've zoomed in on a single data point to better understand the nature of Suzhou New District Hi-Tech IndustrialLtd'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.