There May Be Underlying Issues With The Quality Of Feiyu Technology International's (HKG:1022) Earnings

Investors were disappointed with Feiyu Technology International Company Ltd.'s (HKG:1022) earnings, despite the strong profit numbers. We did some digging and found some worrying underlying problems.

View our latest analysis for Feiyu Technology International

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Feiyu Technology International's profit received a boost of CN¥8.3m in unusual items, over the last year. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. Feiyu Technology International had a rather significant contribution from unusual items relative to its profit to June 2023. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

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 previously mentioned, Feiyu Technology International's large boost from unusual items won't be there indefinitely, so its statutory earnings are probably a poor guide to its underlying profitability. For this reason, we think that Feiyu Technology International's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. On the bright side, the company showed enough improvement to book a profit this year, after losing money last year. 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. If you want to do dive deeper into Feiyu Technology International, you'd also look into what risks it is currently facing. In terms of investment risks, we've identified 2 warning signs with Feiyu Technology International, and understanding them should be part of your investment process.

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 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.