Shenzhen Forms Syntron InformationLtd (SZSE:300468) Posted Healthy Earnings But There Are Some Other Factors To Be Aware Of

Unsurprisingly, Shenzhen Forms Syntron Information Co.,Ltd.'s (SZSE:300468) stock price was strong on the back of its healthy earnings report. However, our analysis suggests that shareholders may be missing some factors that indicate the earnings result was not as good as it looked.

See our latest analysis for Shenzhen Forms Syntron InformationLtd

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Shenzhen Forms Syntron InformationLtd's profit received a boost of CN¥5.0m in unusual items, over the last year. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. 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. Which is hardly surprising, given the name. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Shenzhen Forms Syntron InformationLtd.

Our Take On Shenzhen Forms Syntron InformationLtd's Profit Performance

Arguably, Shenzhen Forms Syntron InformationLtd's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Shenzhen Forms Syntron InformationLtd's statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 10% EPS growth in the last year. 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. For example, we've discovered 2 warning signs that you should run your eye over to get a better picture of Shenzhen Forms Syntron InformationLtd.

This note has only looked at a single factor that sheds light on the nature of Shenzhen Forms Syntron InformationLtd'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. 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.