Despite posting some strong earnings, the market for Guangdong Champion Asia Electronics Co.,Ltd.'s (SHSE:603386) stock hasn't moved much. Our analysis suggests that shareholders have noticed something concerning in the numbers.

View our latest analysis for Guangdong Champion Asia ElectronicsLtd

The Impact Of Unusual Items On Profit

For anyone who wants to understand Guangdong Champion Asia ElectronicsLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥32m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Guangdong Champion Asia ElectronicsLtd.

Our Take On Guangdong Champion Asia ElectronicsLtd's Profit Performance

Arguably, Guangdong Champion Asia ElectronicsLtd's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Guangdong Champion Asia ElectronicsLtd's statutory profits are better than its underlying earnings power. But on the bright side, its earnings per share have grown at an extremely impressive rate 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. You'd be interested to know, that we found 3 warning signs for Guangdong Champion Asia ElectronicsLtd and you'll want to know about these bad boys.

Today we've zoomed in on a single data point to better understand the nature of Guangdong Champion Asia ElectronicsLtd'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.