We Think That There Are Issues Underlying Fujian Raynen Technology's (SHSE:603933) Earnings

Despite announcing strong earnings, Fujian Raynen Technology Co., Ltd.'s (SHSE:603933) stock was sluggish. We think that the market might be paying attention to some underlying factors that they find to be concerning.

Check out our latest analysis for Fujian Raynen Technology

How Do Unusual Items Influence Profit?

For anyone who wants to understand Fujian Raynen Technology's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥14m worth of unusual items. 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'. If Fujian Raynen Technology 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 Fujian Raynen Technology.

Our Take On Fujian Raynen Technology's Profit Performance

We'd posit that Fujian Raynen Technology's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that Fujian Raynen Technology's true underlying earnings power is actually less than its statutory profit. The good news is that, its earnings per share increased by 52% in the last year. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. If you'd like to know more about Fujian Raynen Technology as a business, it's important to be aware of any risks it's facing. For example - Fujian Raynen Technology has 1 warning sign we think you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Fujian Raynen Technology's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. 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.

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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.