Shareholders Can Be Confident That Suzhou Chunqiu Electronic Technology's (SHSE:603890) Earnings Are High Quality

The subdued stock price reaction suggests that Suzhou Chunqiu Electronic Technology Co., Ltd.'s (SHSE:603890) strong earnings didn't offer any surprises. Investors are probably missing some underlying factors which are encouraging for the future of the company.

View our latest analysis for Suzhou Chunqiu Electronic Technology

The Impact Of Unusual Items On Profit

To properly understand Suzhou Chunqiu Electronic Technology's profit results, we need to consider the CN¥22m expense attributed 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 that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect Suzhou Chunqiu Electronic Technology 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 Suzhou Chunqiu Electronic Technology.

Our Take On Suzhou Chunqiu Electronic Technology's Profit Performance

Because unusual items detracted from Suzhou Chunqiu Electronic Technology's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Suzhou Chunqiu Electronic Technology'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. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. While conducting our analysis, we found that Suzhou Chunqiu Electronic Technology has 1 warning sign and it would be unwise to ignore it.

This note has only looked at a single factor that sheds light on the nature of Suzhou Chunqiu Electronic Technology'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.