There May Be Reason For Hope In Daoming Optics&ChemicalLtd's (SZSE:002632) Disappointing Earnings

The market for Daoming Optics&Chemical Co.,Ltd's (SZSE:002632) shares didn't move much after it posted weak earnings recently. We think that the softer headline numbers might be getting counterbalanced by some positive underlying factors.

See our latest analysis for Daoming Optics&ChemicalLtd

The Impact Of Unusual Items On Profit

For anyone who wants to understand Daoming Optics&ChemicalLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥37m due to unusual items. 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. If Daoming Optics&ChemicalLtd doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Daoming Optics&ChemicalLtd.

Our Take On Daoming Optics&ChemicalLtd's Profit Performance

Because unusual items detracted from Daoming Optics&ChemicalLtd's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Daoming Optics&ChemicalLtd's earnings potential is at least as good as it seems, and maybe even better! On the other hand, its EPS actually shrunk in the last twelve months. 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. While conducting our analysis, we found that Daoming Optics&ChemicalLtd has 3 warning signs and it would be unwise to ignore them.

This note has only looked at a single factor that sheds light on the nature of Daoming Optics&ChemicalLtd'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. 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 that insiders are buying 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.