Suzhou New District Hi-Tech IndustrialLtd's (SHSE:600736) Problems Go Beyond Weak Profit

A lackluster earnings announcement from Suzhou New District Hi-Tech Industrial Co.,Ltd (SHSE:600736) last week didn't sink the stock price. However, we believe that investors should be aware of some underlying factors which may be of concern.

Check out our latest analysis for Suzhou New District Hi-Tech IndustrialLtd

The Impact Of Unusual Items On 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 gained from CN¥90m worth of unusual items. 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, after all, that's exactly what the accounting terminology implies. 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 Suzhou New District Hi-Tech IndustrialLtd.

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

We'd posit that Suzhou New District Hi-Tech IndustrialLtd's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that Suzhou New District Hi-Tech IndustrialLtd's statutory profits are better than its underlying earnings power. In further bad news, its earnings per share decreased in the last year. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Case in point: We've spotted 4 warning signs for Suzhou New District Hi-Tech IndustrialLtd you should be mindful of and 2 of them don't sit too well with us.

This note has only looked at a single factor that sheds light on 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 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.