We Think You Can Look Beyond Sunshine Global CircuitsLtd's (SZSE:300739) Lackluster Earnings

The market for Sunshine Global Circuits Co.,Ltd.'s (SZSE:300739) shares didn't move much after it posted weak earnings recently. We did some digging, and we believe the earnings are stronger than they seem.

View our latest analysis for Sunshine Global CircuitsLtd

How Do Unusual Items Influence Profit?

For anyone who wants to understand Sunshine Global CircuitsLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥27m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. If Sunshine Global CircuitsLtd doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Sunshine Global CircuitsLtd.

Our Take On Sunshine Global CircuitsLtd's Profit Performance

Because unusual items detracted from Sunshine Global CircuitsLtd'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 Sunshine Global CircuitsLtd's statutory profit actually understates its earnings potential! Unfortunately, though, its earnings per share actually fell back over the last year. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. To that end, you should learn about the 5 warning signs we've spotted with Sunshine Global CircuitsLtd (including 1 which doesn't sit too well with us).

Today we've zoomed in on a single data point to better understand the nature of Sunshine Global CircuitsLtd'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. 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.