Yusys Technologies' (SZSE:300674) Earnings Are Weaker Than They Seem

Unsurprisingly, Yusys Technologies Co., Ltd.'s (SZSE:300674) 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 Yusys Technologies

How Do Unusual Items Influence Profit?

For anyone who wants to understand Yusys Technologies' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥31m worth of unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. 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'. 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).

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 Yusys Technologies' Profit Performance

Arguably, Yusys Technologies' statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Yusys Technologies' statutory profits are better than its underlying earnings power. The good news is that, its earnings per share increased by 5.9% 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. So while earnings quality is important, it's equally important to consider the risks facing Yusys Technologies at this point in time. In terms of investment risks, we've identified 1 warning sign with Yusys Technologies, and understanding this should be part of your investment process.

This note has only looked at a single factor that sheds light on the nature of Yusys Technologies' 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.