Statutory Profit Doesn't Reflect How Good Gettop Acoustic's (SZSE:002655) Earnings Are

Gettop Acoustic Co., Ltd. (SZSE:002655) recently posted some strong earnings, and the market responded positively. Our analysis found some more factors that we think are good for shareholders.

View our latest analysis for Gettop Acoustic

How Do Unusual Items Influence Profit?

For anyone who wants to understand Gettop Acoustic's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥11m due to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect Gettop Acoustic to produce a higher profit next year, all else being equal.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Gettop Acoustic.

Our Take On Gettop Acoustic's Profit Performance

Because unusual items detracted from Gettop Acoustic's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Gettop Acoustic's statutory profit actually understates its earnings potential! And on top of that, its earnings per share increased by 15% 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. While it's very important to consider the profit and loss statement, you can also learn a lot about a company by looking at its balance sheet. If you're interested we have a graphic representation of Gettop Acoustic's balance sheet.

This note has only looked at a single factor that sheds light on the nature of Gettop Acoustic'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 that insiders are buying 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.