Allwinnertech TechnologyLtd's (SZSE:300458) Problems Go Beyond Weak Profit

A lackluster earnings announcement from Allwinnertech Technology Co.,Ltd. (SZSE:300458) last week didn't sink the stock price. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

See our latest analysis for Allwinnertech TechnologyLtd

The Impact Of Unusual Items On Profit

For anyone who wants to understand Allwinnertech TechnologyLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥16m 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. Which is hardly surprising, given the name. Allwinnertech TechnologyLtd had a rather significant contribution from unusual items relative to its profit to December 2023. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

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 Allwinnertech TechnologyLtd's Profit Performance

As we discussed above, we think the significant positive unusual item makes Allwinnertech TechnologyLtd's earnings a poor guide to its underlying profitability. For this reason, we think that Allwinnertech TechnologyLtd's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. In further bad news, its earnings per share decreased in the 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. If you want to do dive deeper into Allwinnertech TechnologyLtd, you'd also look into what risks it is currently facing. For example - Allwinnertech TechnologyLtd has 3 warning signs we think you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Allwinnertech TechnologyLtd'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 that insiders are buying 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.