Foshan Blue Rocket ElectronicsLtd's (SZSE:301348) Weak Earnings May Only Reveal A Part Of The Whole Picture

The market wasn't impressed with the soft earnings from Foshan Blue Rocket Electronics Co.,Ltd. (SZSE:301348) recently. We did some analysis, and found that there are some reasons to be cautious about the headline numbers.

Check out our latest analysis for Foshan Blue Rocket ElectronicsLtd

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Foshan Blue Rocket ElectronicsLtd's profit received a boost of CN¥14m in unusual items, over the last year. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. 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. We can see that Foshan Blue Rocket ElectronicsLtd's positive unusual items were quite significant relative to its profit in the year to September 2024. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Foshan Blue Rocket ElectronicsLtd.

Our Take On Foshan Blue Rocket ElectronicsLtd's Profit Performance

As we discussed above, we think the significant positive unusual item makes Foshan Blue Rocket ElectronicsLtd's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Foshan Blue Rocket ElectronicsLtd's underlying earnings power is lower than its statutory profit. In further bad news, its earnings per share decreased 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 want to do dive deeper into Foshan Blue Rocket ElectronicsLtd, you'd also look into what risks it is currently facing. Our analysis shows 5 warning signs for Foshan Blue Rocket ElectronicsLtd (3 are a bit concerning!) and we strongly recommend you look at them before investing.

This note has only looked at a single factor that sheds light on the nature of Foshan Blue Rocket ElectronicsLtd'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. 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.