We Think That There Are Issues Underlying Shenzhen Goodix Technology's (SHSE:603160) Earnings

Despite posting some strong earnings, the market for Shenzhen Goodix Technology Co., Ltd.'s (SHSE:603160) stock hasn't moved much. We did some digging, and we found some concerning factors in the details.

See our latest analysis for Shenzhen Goodix Technology

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Shenzhen Goodix Technology's profit received a boost of CN¥392m in unusual items, over the last year. 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, after all, that's exactly what the accounting terminology implies. Shenzhen Goodix Technology had a rather significant contribution from unusual items relative to its profit to September 2024. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

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 Shenzhen Goodix Technology's Profit Performance

As we discussed above, we think the significant positive unusual item makes Shenzhen Goodix Technology's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Shenzhen Goodix Technology's underlying earnings power is lower than its statutory profit. The good news is that it earned a profit in the last twelve months, despite its previous loss. 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. Case in point: We've spotted 1 warning sign for Shenzhen Goodix Technology you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Shenzhen Goodix 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 with significant insider holdings to be useful.

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.