Hangzhou Seck Intelligent Technology's (SZSE:300897) Profits Appear To Have Quality Issues

Following the solid earnings report from Hangzhou Seck Intelligent Technology Co., Ltd. (SZSE:300897), the market responded by bidding up the stock price. Despite this, our analysis suggests that there are some factors weakening the foundations of those good profit numbers.

See our latest analysis for Hangzhou Seck Intelligent Technology

The Impact Of Unusual Items On Profit

To properly understand Hangzhou Seck Intelligent Technology's profit results, we need to consider the CN¥8.1m gain attributed to unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And, after all, that's exactly what the accounting terminology implies. If Hangzhou Seck Intelligent Technology doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

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

Our Take On Hangzhou Seck Intelligent Technology's Profit Performance

Arguably, Hangzhou Seck Intelligent Technology's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Hangzhou Seck Intelligent Technology's true underlying earnings power is actually less than its statutory profit. Nonetheless, it's still worth noting that its earnings per share have grown at 18% over the last three years. 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. If you want to do dive deeper into Hangzhou Seck Intelligent Technology, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 1 warning sign for Hangzhou Seck Intelligent Technology and you'll want to know about it.

Today we've zoomed in on a single data point to better understand the nature of Hangzhou Seck Intelligent 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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.