Hefei Meyer Optoelectronic Technology (SZSE:002690) Strong Profits May Be Masking Some Underlying Issues

The recent earnings posted by Hefei Meyer Optoelectronic Technology Inc. (SZSE:002690) were solid, but the stock didn't move as much as we expected. We believe that shareholders have noticed some concerning factors beyond the statutory profit numbers.

View our latest analysis for Hefei Meyer Optoelectronic Technology

How Do Unusual Items Influence Profit?

To properly understand Hefei Meyer Optoelectronic Technology's profit results, we need to consider the CN¥57m gain attributed to 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. If Hefei Meyer Optoelectronic Technology doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

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 Hefei Meyer Optoelectronic Technology's Profit Performance

Arguably, Hefei Meyer Optoelectronic Technology's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Hefei Meyer Optoelectronic Technology's statutory profits are better than its underlying earnings power. Nonetheless, it's still worth noting that its earnings per share have grown at 70% 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Case in point: We've spotted 1 warning sign for Hefei Meyer Optoelectronic Technology you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Hefei Meyer Optoelectronic Technology'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. 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.