Some May Be Optimistic About Shenzhen EXC-LED TechnologyLtd's (SZSE:300889) Earnings

Shareholders appeared unconcerned with Shenzhen EXC-LED Technology Co.Ltd's (SZSE:300889) lackluster earnings report last week. Our analysis suggests that while the profits are soft, the foundations of the business are strong.

Check out our latest analysis for Shenzhen EXC-LED TechnologyLtd

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Shenzhen EXC-LED TechnologyLtd's profit was reduced by CN¥36m, 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. Shenzhen EXC-LED TechnologyLtd took a rather significant hit from unusual items in the year to March 2024. All else being equal, this would likely have the effect of making the statutory profit look worse than its underlying earnings power.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Shenzhen EXC-LED TechnologyLtd.

Our Take On Shenzhen EXC-LED TechnologyLtd's Profit Performance

As we discussed above, we think the significant unusual expense will make Shenzhen EXC-LED TechnologyLtd's statutory profit lower than it would otherwise have been. Based on this observation, we consider it possible that Shenzhen EXC-LED TechnologyLtd's statutory profit actually understates its earnings potential! Unfortunately, though, its earnings per share actually fell back over 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. When we did our research, we found 4 warning signs for Shenzhen EXC-LED TechnologyLtd (2 can't be ignored!) that we believe deserve your full attention.

Today we've zoomed in on a single data point to better understand the nature of Shenzhen EXC-LED TechnologyLtd'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.