We Think You Should Be Aware Of Some Concerning Factors In Dencare (Chongqing) Oral Care's (SZSE:001328) Earnings

The market for Dencare (Chongqing) Oral Care Co., Ltd.'s (SZSE:001328) stock was strong after it released a healthy earnings report last week. Despite this, our analysis suggests that there are some factors weakening the foundations of those good profit numbers.

Check out our latest analysis for Dencare (Chongqing) Oral Care

The Impact Of Unusual Items On Profit

For anyone who wants to understand Dencare (Chongqing) Oral Care's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥36m 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. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And that's as you'd expect, given these boosts are described as 'unusual'. We can see that Dencare (Chongqing) Oral Care's positive unusual items were quite significant relative to its profit in the year to September 2024. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

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 Dencare (Chongqing) Oral Care's Profit Performance

As we discussed above, we think the significant positive unusual item makes Dencare (Chongqing) Oral Care's earnings a poor guide to its underlying profitability. For this reason, we think that Dencare (Chongqing) Oral Care's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. Sadly, its EPS was down over the last twelve months. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. In terms of investment risks, we've identified 2 warning signs with Dencare (Chongqing) Oral Care, and understanding them should be part of your investment process.

This note has only looked at a single factor that sheds light on the nature of Dencare (Chongqing) Oral Care's profit. But there are plenty of other ways to inform your opinion of a company. 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 with high insider ownership.

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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.