Founder Technology GroupLtd (SHSE:600601) Is Posting Promising Earnings But The Good News Doesn’t Stop There

Founder Technology Group Co.,Ltd.'s (SHSE:600601) solid earnings announcement recently didn't do much to the stock price. We did some analysis to find out why and believe that investors might be missing some encouraging factors contained in the earnings.

See our latest analysis for Founder Technology GroupLtd

How Do Unusual Items Influence Profit?

For anyone who wants to understand Founder Technology GroupLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥35m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Founder Technology GroupLtd to produce a higher profit next year, all else being equal.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Founder Technology GroupLtd.

Our Take On Founder Technology GroupLtd's Profit Performance

Unusual items (expenses) detracted from Founder Technology GroupLtd's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Founder Technology GroupLtd's statutory profit actually understates its earnings potential! And it's also positive that 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. While it's very important to consider the profit and loss statement, you can also learn a lot about a company by looking at its balance sheet. If you're interested we have a graphic representation of Founder Technology GroupLtd's balance sheet.

This note has only looked at a single factor that sheds light on the nature of Founder Technology GroupLtd's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. 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.