Feiyu Technology International's (HKG:1022) Conservative Accounting Might Explain Soft Earnings

Feiyu Technology International Company Ltd.'s (HKG:1022) stock was strong despite it releasing a soft earnings report last week. However, we think the company is showing some signs that things are more promising than they seem.

View our latest analysis for Feiyu Technology International

How Do Unusual Items Influence Profit?

For anyone who wants to understand Feiyu Technology International's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥17m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. In the twelve months to June 2024, Feiyu Technology International had a big unusual items expense. All else being equal, this would likely have the effect of making the statutory profit look worse than its underlying earnings power.

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

Our Take On Feiyu Technology International's Profit Performance

As we discussed above, we think the significant unusual expense will make Feiyu Technology International's statutory profit lower than it would otherwise have been. Based on this observation, we consider it possible that Feiyu Technology International's statutory profit actually understates its earnings potential! Unfortunately, though, its earnings per share actually fell back over the last year. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example, we've discovered 4 warning signs that you should run your eye over to get a better picture of Feiyu Technology International.

Today we've zoomed in on a single data point to better understand the nature of Feiyu Technology International'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 with significant insider holdings 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.