Shenzhen Longood Intelligent ElectricLTD's (SZSE:300543) Shareholders Have More To Worry About Than Only Soft Earnings

A lackluster earnings announcement from Shenzhen Longood Intelligent Electric Co.,LTD (SZSE:300543) last week didn't sink the stock price. We think that investors are worried about some weaknesses underlying the earnings.

Check out our latest analysis for Shenzhen Longood Intelligent ElectricLTD

How Do Unusual Items Influence Profit?

For anyone who wants to understand Shenzhen Longood Intelligent ElectricLTD's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥11m 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. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. We can see that Shenzhen Longood Intelligent ElectricLTD's positive unusual items were quite significant relative to its profit in the year 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 Shenzhen Longood Intelligent ElectricLTD.

Our Take On Shenzhen Longood Intelligent ElectricLTD's Profit Performance

As we discussed above, we think the significant positive unusual item makes Shenzhen Longood Intelligent ElectricLTD's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Shenzhen Longood Intelligent ElectricLTD's underlying earnings power is lower 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. To help with this, we've discovered 4 warning signs (1 is concerning!) that you ought to be aware of before buying any shares in Shenzhen Longood Intelligent ElectricLTD.

Today we've zoomed in on a single data point to better understand the nature of Shenzhen Longood Intelligent ElectricLTD'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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.