Vanchip (Tianjin) Technology's (SHSE:688153) Earnings Are Of Questionable Quality

Despite announcing strong earnings, Vanchip (Tianjin) Technology Co., Ltd.'s (SHSE:688153) stock was sluggish. Our analysis uncovered some concerning factors that we believe the market might be paying attention to.

View our latest analysis for Vanchip (Tianjin) Technology

The Impact Of Unusual Items On Profit

For anyone who wants to understand Vanchip (Tianjin) Technology's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥15m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And that's as you'd expect, given these boosts are described as 'unusual'. If Vanchip (Tianjin) Technology doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

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 Vanchip (Tianjin) Technology's Profit Performance

We'd posit that Vanchip (Tianjin) 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 Vanchip (Tianjin) Technology's true underlying earnings power is actually less than its statutory profit. On the bright side, the company showed enough improvement to book a profit this year, after losing money last year. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. At Simply Wall St, we found 2 warning signs for Vanchip (Tianjin) Technology and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of Vanchip (Tianjin) Technology'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. 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.