Daoming Optics&Chemical Co.,Ltd's (SZSE:002632) stock was strong despite it releasing a soft earnings report last week. Our analysis suggests that investors may have noticed some promising signs beyond the statutory profit figures.
The Impact Of Unusual Items On Profit
Importantly, our data indicates that Daoming Optics&ChemicalLtd's profit was reduced by CN¥37m, due to unusual items, over the last year. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect Daoming Optics&ChemicalLtd 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 Daoming Optics&ChemicalLtd.
Our Take On Daoming Optics&ChemicalLtd's Profit Performance
Unusual items (expenses) detracted from Daoming Optics&ChemicalLtd's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Daoming Optics&ChemicalLtd's statutory profit actually understates its earnings potential! Unfortunately, though, its earnings per share actually fell back over the 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. At Simply Wall St, we found 3 warning signs for Daoming Optics&ChemicalLtd and we think they deserve your attention.
Today we've zoomed in on a single data point to better understand the nature of Daoming Optics&ChemicalLtd'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.