Hangzhou Weiguang Electronic Co.,Ltd.'s (SZSE:002801) stock was strong despite it releasing a soft earnings report last week. We think that investors might be looking at some positive factors beyond the earnings numbers.

The Impact Of Unusual Items On Profit

For anyone who wants to understand Hangzhou Weiguang ElectronicLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥217m due 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. Hangzhou Weiguang ElectronicLtd took a rather significant hit from unusual items in the year to March 2024. As a result, we can surmise that the unusual items made its statutory profit significantly weaker than it would otherwise be.

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 Hangzhou Weiguang ElectronicLtd's Profit Performance

As we discussed above, we think the significant unusual expense will make Hangzhou Weiguang ElectronicLtd's statutory profit lower than it would otherwise have been. Based on this observation, we consider it possible that Hangzhou Weiguang ElectronicLtd's statutory profit actually understates its earnings potential! Unfortunately, though, its earnings per share actually fell back over the last year. 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. For example - Hangzhou Weiguang ElectronicLtd has 3 warning signs we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Hangzhou Weiguang ElectronicLtd's profit. But there are plenty of other ways to inform your opinion of a company. 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.