Sichuan Chengfei Integration TechnologyLtd's (SZSE:002190) Conservative Accounting Might Explain Soft Earnings

Soft earnings didn't appear to concern Sichuan Chengfei Integration Technology Corp.Ltd's (SZSE:002190) shareholders over the last week. We did some digging, and we believe the earnings are stronger than they seem.

View our latest analysis for Sichuan Chengfei Integration TechnologyLtd

How Do Unusual Items Influence Profit?

To properly understand Sichuan Chengfei Integration TechnologyLtd's profit results, we need to consider the CN¥15m expense attributed 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. 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. Assuming those unusual expenses don't come up again, we'd therefore expect Sichuan Chengfei Integration TechnologyLtd to produce a higher profit next year, all else being equal.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Sichuan Chengfei Integration TechnologyLtd.

Our Take On Sichuan Chengfei Integration TechnologyLtd's Profit Performance

Unusual items (expenses) detracted from Sichuan Chengfei Integration TechnologyLtd's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Sichuan Chengfei Integration TechnologyLtd's statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in the last twelve months. 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 if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Every company has risks, and we've spotted 1 warning sign for Sichuan Chengfei Integration TechnologyLtd you should know about.

Today we've zoomed in on a single data point to better understand the nature of Sichuan Chengfei Integration TechnologyLtd's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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. 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.