There May Be Underlying Issues With The Quality Of Jiangsu Cai Qin Technology's (SHSE:688182) Earnings

Investors were disappointed with Jiangsu Cai Qin Technology Co., Ltd's (SHSE:688182) earnings, despite the strong profit numbers. We think that the market might be paying attention to some underlying factors that they find to be concerning.

View our latest analysis for Jiangsu Cai Qin Technology

How Do Unusual Items Influence Profit?

For anyone who wants to understand Jiangsu Cai Qin Technology's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥8.0m worth of unusual items. 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 that's as you'd expect, given these boosts are described as 'unusual'. We can see that Jiangsu Cai Qin Technology's positive unusual items were quite significant relative to its profit in the year to September 2024. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

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

Our Take On Jiangsu Cai Qin Technology's Profit Performance

As we discussed above, we think the significant positive unusual item makes Jiangsu Cai Qin Technology's earnings a poor guide to its underlying profitability. For this reason, we think that Jiangsu Cai Qin Technology's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. The good news is that, its earnings per share increased by 70% in the 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. If you'd like to know more about Jiangsu Cai Qin Technology as a business, it's important to be aware of any risks it's facing. For example, we've found that Jiangsu Cai Qin Technology has 2 warning signs (1 is potentially serious!) that deserve your attention before going any further with your analysis.

This note has only looked at a single factor that sheds light on the nature of Jiangsu Cai Qin Technology's profit. But there are plenty of other ways to inform your opinion of a company. 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 with significant insider holdings to be useful.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.