Impressive Earnings May Not Tell The Whole Story For Fuxin Dare Automotive Parts (SZSE:300473)

Fuxin Dare Automotive Parts Co., Ltd.'s (SZSE:300473) stock was strong after they recently reported robust earnings. We did some analysis and think that investors are missing some details hidden beneath the profit numbers.

Check out our latest analysis for Fuxin Dare Automotive Parts

How Do Unusual Items Influence Profit?

For anyone who wants to understand Fuxin Dare Automotive Parts' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥9.5m worth of unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. Which is hardly surprising, given the name. If Fuxin Dare Automotive Parts doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Fuxin Dare Automotive Parts.

Our Take On Fuxin Dare Automotive Parts' Profit Performance

Arguably, Fuxin Dare Automotive Parts' statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Fuxin Dare Automotive Parts' statutory profits are better than its underlying earnings power. On the bright side, the company showed enough improvement to book a profit this year, after losing money 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. While conducting our analysis, we found that Fuxin Dare Automotive Parts has 2 warning signs and it would be unwise to ignore these bad boys.

This note has only looked at a single factor that sheds light on the nature of Fuxin Dare Automotive Parts' 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 with significant insider holdings 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.