LifeTech Scientific's (HKG:1302) Soft Earnings Are Actually Better Than They Appear

Shareholders appeared unconcerned with LifeTech Scientific Corporation's (HKG:1302) lackluster earnings report last week. Our analysis suggests that while the profits are soft, the foundations of the business are strong.

Check out our latest analysis for LifeTech Scientific

How Do Unusual Items Influence Profit?

For anyone who wants to understand LifeTech Scientific's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥178m due to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. 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. In the twelve months to December 2023, LifeTech Scientific had a big unusual items expense. As a result, we can surmise that the unusual items made its statutory profit significantly weaker than it would otherwise be.

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On LifeTech Scientific's Profit Performance

As we mentioned previously, the LifeTech Scientific's profit was hampered by unusual items in the last year. Because of this, we think LifeTech Scientific's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! And on top of that, its earnings per share have grown at 21% per year 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 LifeTech Scientific, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 2 warning signs for LifeTech Scientific you should know about.

Today we've zoomed in on a single data point to better understand the nature of LifeTech Scientific'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.