Guangdong AVCiT Technology Holding's (SZSE:001229) Profits May Not Reveal Underlying Issues

The recent earnings posted by Guangdong AVCiT Technology Holding Co., Ltd. (SZSE:001229) were solid, but the stock didn't move as much as we expected. However the statutory profit number doesn't tell the whole story, and we have found some factors which might be of concern to shareholders.

Check out our latest analysis for Guangdong AVCiT Technology Holding

How Do Unusual Items Influence Profit?

For anyone who wants to understand Guangdong AVCiT Technology Holding's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥7.0m worth of unusual items. 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. Which is hardly surprising, given the name. If Guangdong AVCiT Technology Holding doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

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

Our Take On Guangdong AVCiT Technology Holding's Profit Performance

We'd posit that Guangdong AVCiT Technology Holding's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that Guangdong AVCiT Technology Holding's true underlying earnings power is actually less than its statutory profit. In further bad news, its earnings per share decreased 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 Guangdong AVCiT Technology Holding as a business, it's important to be aware of any risks it's facing. You'd be interested to know, that we found 2 warning signs for Guangdong AVCiT Technology Holding and you'll want to know about these bad boys.

This note has only looked at a single factor that sheds light on the nature of Guangdong AVCiT Technology Holding'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 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.