Monday, May 27, 2024

We Think That There Are More Issues For Huaqin Technology (SHSE:603296) Than Just Sluggish Earnings

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The market rallied behind Huaqin Technology Co., Ltd.’s (SHSE:603296) stock, leading do a rise in the share price after its recent weak earnings report. We think that shareholders might be missing some concerning factors that our analysis found.

View our latest analysis for Huaqin Technology

SHSE:603296 Earnings and Revenue History May 5th 2024

How Do Unusual Items Influence Profit?

For anyone who wants to understand Huaqin Technology’s profit beyond the statutory numbers, it’s important to note that during the last twelve months statutory profit gained from CN¥181m worth of unusual items. We can’t deny that higher profits generally leave us optimistic, but we’d prefer it if the profit were to be sustainable. We ran the numbers on most publicly listed companies worldwide, and it’s very common for unusual items to be once-off in nature. And, after all, that’s exactly what the accounting terminology implies. If Huaqin Technology doesn’t see that contribution repeat, then all else being equal we’d expect its profit to drop over the current year.

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 Huaqin Technology’s Profit Performance

We’d posit that Huaqin Technology’s statutory earnings aren’t a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that Huaqin Technology’s statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 17% per annum growth in EPS for the last three. 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’d like to know more about Huaqin Technology as a business, it’s important to be aware of any risks it’s facing. In terms of investment risks, we’ve identified 1 warning sign with Huaqin Technology, and understanding this should be part of your investment process.

This note has only looked at a single factor that sheds light on the nature of Huaqin Technology’s profit. But there are plenty of other ways to inform your opinion of a company. 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.

Valuation is complex, but we’re helping make it simple.

Find out whether Huaqin Technology is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

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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.

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