We Think That There Are Issues Underlying Shandong New Beiyang Information Technology's (SZSE:002376) Earnings

Last week's profit announcement from Shandong New Beiyang Information Technology Co., Ltd. (SZSE:002376) was underwhelming for investors, despite headline numbers being robust. We did some digging and found some worrying underlying problems.

View our latest analysis for Shandong New Beiyang Information Technology

How Do Unusual Items Influence Profit?

For anyone who wants to understand Shandong New Beiyang Information Technology's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥16m 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. Which is hardly surprising, given the name. Shandong New Beiyang Information Technology 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.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Shandong New Beiyang Information Technology.

Our Take On Shandong New Beiyang Information Technology's Profit Performance

As we discussed above, we think the significant positive unusual item makes Shandong New Beiyang Information Technology's earnings a poor guide to its underlying profitability. For this reason, we think that Shandong New Beiyang Information 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. On the bright side, 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. To help with this, we've discovered 2 warning signs (1 makes us a bit uncomfortable!) that you ought to be aware of before buying any shares in Shandong New Beiyang Information Technology.

Today we've zoomed in on a single data point to better understand the nature of Shandong New Beiyang Information Technology's profit. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. 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.