We Think That There Are Some Issues For Shandong Dawn PolymerLtd (SZSE:002838) Beyond Its Promising Earnings

Following the solid earnings report from Shandong Dawn Polymer Co.,Ltd. (SZSE:002838), the market responded by bidding up the stock price. While the profit numbers were good, our analysis has found some concerning factors that shareholders should be aware of.

View our latest analysis for Shandong Dawn PolymerLtd

How Do Unusual Items Influence Profit?

For anyone who wants to understand Shandong Dawn PolymerLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥45m worth of 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. And, after all, that's exactly what the accounting terminology implies. We can see that Shandong Dawn PolymerLtd's positive unusual items were quite significant relative to its profit in the year to December 2024. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Shandong Dawn PolymerLtd.

Our Take On Shandong Dawn PolymerLtd's Profit Performance

As we discussed above, we think the significant positive unusual item makes Shandong Dawn PolymerLtd's earnings a poor guide to its underlying profitability. For this reason, we think that Shandong Dawn PolymerLtd's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. The good news is that its earnings per share increased slightly in the last year. 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. Case in point: We've spotted 3 warning signs for Shandong Dawn PolymerLtd you should be mindful of and 1 of them can't be ignored.

Today we've zoomed in on a single data point to better understand the nature of Shandong Dawn PolymerLtd's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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 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.