Guangdong Dowstone Technology's (SZSE:300409) Earnings May Just Be The Starting Point

When companies post strong earnings, the stock generally performs well, just like Guangdong Dowstone Technology Co., Ltd.'s (SZSE:300409) stock has recently. We did some digging and found some further encouraging factors that investors will like.

View our latest analysis for Guangdong Dowstone Technology

How Do Unusual Items Influence Profit?

For anyone who wants to understand Guangdong Dowstone Technology's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥63m due to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Guangdong Dowstone Technology to produce a higher profit next year, all else being equal.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Guangdong Dowstone Technology.

Our Take On Guangdong Dowstone Technology's Profit Performance

Unusual items (expenses) detracted from Guangdong Dowstone Technology's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Guangdong Dowstone Technology's statutory profit actually understates its earnings potential! And one can definitely find a positive in the fact that it made a profit this year, despite losing money last year. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Our analysis shows 3 warning signs for Guangdong Dowstone Technology (1 shouldn't be ignored!) and we strongly recommend you look at these before investing.

This note has only looked at a single factor that sheds light on the nature of Guangdong Dowstone Technology'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. 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.