Hubei DinglongLtd's (SZSE:300054) Anemic Earnings Might Be Worse Than You Think

The market wasn't impressed with the soft earnings from Hubei Dinglong CO.,Ltd. (SZSE:300054) recently. We did some further digging and think they have a few more reasons to be concerned beyond the statutory profit.

View our latest analysis for Hubei DinglongLtd

How Do Unusual Items Influence Profit?

For anyone who wants to understand Hubei DinglongLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥53m 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. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's as you'd expect, given these boosts are described as 'unusual'. If Hubei DinglongLtd doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

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 Hubei DinglongLtd's Profit Performance

Arguably, Hubei DinglongLtd's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Hubei DinglongLtd's true underlying earnings power is actually less than its statutory profit. Sadly, its EPS was down over 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. If you want to do dive deeper into Hubei DinglongLtd, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 1 warning sign for Hubei DinglongLtd and you'll want to know about it.

Today we've zoomed in on a single data point to better understand the nature of Hubei DinglongLtd'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 that insiders are buying.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.