Beilong Precision Technology's (SZSE:301567) Shareholders May Want To Dig Deeper Than Statutory Profit

Beilong Precision Technology Co., Ltd. (SZSE:301567) just released a solid earnings report, and the stock displayed some strength. However, we think that shareholders should be cautious as we found some worrying factors underlying the profit.

View our latest analysis for Beilong Precision Technology

How Do Unusual Items Influence Profit?

For anyone who wants to understand Beilong Precision Technology's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥8.8m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. Which is hardly surprising, given the name. If Beilong Precision 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 Beilong Precision Technology.

Our Take On Beilong Precision Technology's Profit Performance

We'd posit that Beilong Precision Technology's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that Beilong Precision Technology's statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 11% per annum growth in EPS for the last three. 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. So while earnings quality is important, it's equally important to consider the risks facing Beilong Precision Technology at this point in time. Case in point: We've spotted 2 warning signs for Beilong Precision Technology you should be mindful of and 1 of these is concerning.

This note has only looked at a single factor that sheds light on the nature of Beilong Precision Technology's profit. But there are plenty of other ways to inform your opinion of a company. 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.