There May Be Reason For Hope In Singatron Electronic (China)'s (SZSE:301329) Disappointing Earnings

Soft earnings didn't appear to concern Singatron Electronic (China) Co., Ltd.'s (SZSE:301329) shareholders over the last week. We did some digging, and we believe the earnings are stronger than they seem.

See our latest analysis for Singatron Electronic (China)

How Do Unusual Items Influence Profit?

For anyone who wants to understand Singatron Electronic (China)'s profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥14m 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 that's hardly a surprise given these line items are considered unusual. If Singatron Electronic (China) 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 Singatron Electronic (China).

Our Take On Singatron Electronic (China)'s Profit Performance

Unusual items (expenses) detracted from Singatron Electronic (China)'s earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Singatron Electronic (China)'s statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in the last twelve months. 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. 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. Our analysis shows 2 warning signs for Singatron Electronic (China) (1 makes us a bit uncomfortable!) and we strongly recommend you look at these before investing.

This note has only looked at a single factor that sheds light on the nature of Singatron Electronic (China)'s profit. But there is always more to discover if you are capable of focussing your mind on minutiae. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. 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.