Earnings Troubles May Signal Larger Issues for Guangxi Oriental Intelligent Manufacturing Technology (SZSE:002175) Shareholders

Guangxi Oriental Intelligent Manufacturing Technology Co., Ltd.'s (SZSE:002175) stock showed strength, with investors undeterred by its weak earnings report. We think that shareholders might be missing some concerning factors that our analysis found.

See our latest analysis for Guangxi Oriental Intelligent Manufacturing Technology

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Guangxi Oriental Intelligent Manufacturing Technology's profit received a boost of CN¥2.6m 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 that's as you'd expect, given these boosts are described as 'unusual'. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Guangxi Oriental Intelligent Manufacturing Technology.

Our Take On Guangxi Oriental Intelligent Manufacturing Technology's Profit Performance

Arguably, Guangxi Oriental Intelligent Manufacturing Technology's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Guangxi Oriental Intelligent Manufacturing Technology'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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. At Simply Wall St, we found 2 warning signs for Guangxi Oriental Intelligent Manufacturing Technology and we think they deserve your attention.

This note has only looked at a single factor that sheds light on the nature of Guangxi Oriental Intelligent Manufacturing 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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.

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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.