Do-Fluoride New Materials' (SZSE:002407) Weak Earnings May Only Reveal A Part Of The Whole Picture

A lackluster earnings announcement from Do-Fluoride New Materials Co., Ltd. (SZSE:002407) last week didn't sink the stock price. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

See our latest analysis for Do-Fluoride New Materials

How Do Unusual Items Influence Profit?

For anyone who wants to understand Do-Fluoride New Materials' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥47m 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 Do-Fluoride New Materials' 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 Do-Fluoride New Materials' Profit Performance

As previously mentioned, Do-Fluoride New Materials' large boost from unusual items won't be there indefinitely, so its statutory earnings are probably a poor guide to its underlying profitability. For this reason, we think that Do-Fluoride New Materials' statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. In further bad news, its earnings per share decreased in the last year. 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. So while earnings quality is important, it's equally important to consider the risks facing Do-Fluoride New Materials at this point in time. Every company has risks, and we've spotted 3 warning signs for Do-Fluoride New Materials (of which 1 can't be ignored!) you should know about.

Today we've zoomed in on a single data point to better understand the nature of Do-Fluoride New Materials' 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.