TCL Technology Group's (SZSE:000100) Profits Appear To Have Quality Issues

Following the solid earnings report from TCL Technology Group Corporation (SZSE:000100), the market responded by bidding up the stock price. However, we think that shareholders should be cautious as we found some worrying factors underlying the profit.

Check out our latest analysis for TCL Technology Group

How Do Unusual Items Influence Profit?

Importantly, our data indicates that TCL Technology Group's profit received a boost of CN¥287m in unusual items, over the last year. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. TCL Technology Group had a rather significant contribution from unusual items relative to its profit 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.

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 TCL Technology Group's Profit Performance

As we discussed above, we think the significant positive unusual item makes TCL Technology Group's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that TCL Technology Group's underlying earnings power is lower than its statutory profit. The good news is that, its earnings per share increased by 28% 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. If you'd like to know more about TCL Technology Group as a business, it's important to be aware of any risks it's facing. To that end, you should learn about the 2 warning signs we've spotted with TCL Technology Group (including 1 which is a bit concerning).

This note has only looked at a single factor that sheds light on the nature of TCL Technology Group'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.

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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.