ZHEJIANG DIBAY ELECTRIC CO.,Ltd.'s (SHSE:603320) healthy profit numbers didn't contain any surprises for investors. We think this is due to investors looking beyond the statutory profits and being concerned with what they see.
The Impact Of Unusual Items On Profit
For anyone who wants to understand ZHEJIANG DIBAY ELECTRICLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥4.2m 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. Which is hardly surprising, given the name. 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 ZHEJIANG DIBAY ELECTRICLtd.
Our Take On ZHEJIANG DIBAY ELECTRICLtd's Profit Performance
We'd posit that ZHEJIANG DIBAY ELECTRICLtd'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 ZHEJIANG DIBAY ELECTRICLtd's statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 23% EPS growth in the last year. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Be aware that ZHEJIANG DIBAY ELECTRICLtd is showing 3 warning signs in our investment analysis and 1 of those is concerning...
Today we've zoomed in on a single data point to better understand the nature of ZHEJIANG DIBAY ELECTRICLtd'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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.
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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.