CRCC High-Tech Equipment's (HKG:1786) Earnings Are Weaker Than They Seem

Despite posting some strong earnings, the market for CRCC High-Tech Equipment Corporation Limited's (HKG:1786) stock hasn't moved much. We did some digging, and we found some concerning factors in the details.

See our latest analysis for CRCC High-Tech Equipment

How Do Unusual Items Influence Profit?

Importantly, our data indicates that CRCC High-Tech Equipment's profit received a boost of CN¥428m in unusual items, over the last year. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. 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. Which is hardly surprising, given the name. We can see that CRCC High-Tech Equipment's positive unusual items were quite significant relative to its profit in the year to December 2023. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of CRCC High-Tech Equipment.

Our Take On CRCC High-Tech Equipment's Profit Performance

As we discussed above, we think the significant positive unusual item makes CRCC High-Tech Equipment's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that CRCC High-Tech Equipment's underlying earnings power is lower than its statutory profit. But on the bright side, its earnings per share have grown at an extremely impressive rate over the last three years. 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. For example, CRCC High-Tech Equipment has 3 warning signs (and 1 which shouldn't be ignored) we think you should know about.

This note has only looked at a single factor that sheds light on the nature of CRCC High-Tech Equipment's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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 that insiders are buying to be useful.

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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.