Investors Shouldn't Be Too Comfortable With Jilin Sino-Microelectronics' (SHSE:600360) Earnings

Despite posting some strong earnings, the market for Jilin Sino-Microelectronics Co., Ltd.'s (SHSE:600360) stock hasn't moved much. Our analysis suggests that shareholders have noticed something concerning in the numbers.

See our latest analysis for Jilin Sino-Microelectronics

How Do Unusual Items Influence Profit?

For anyone who wants to understand Jilin Sino-Microelectronics' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥18m 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 that's as you'd expect, given these boosts are described as 'unusual'. If Jilin Sino-Microelectronics doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Jilin Sino-Microelectronics.

Our Take On Jilin Sino-Microelectronics' Profit Performance

Arguably, Jilin Sino-Microelectronics' statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Jilin Sino-Microelectronics' statutory profits are better than its underlying earnings power. But on the bright side, its earnings per share have grown at an extremely impressive rate 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. While conducting our analysis, we found that Jilin Sino-Microelectronics has 1 warning sign and it would be unwise to ignore this.

This note has only looked at a single factor that sheds light on the nature of Jilin Sino-Microelectronics' 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.

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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.