We Think Sichuan Dowell Science and Technology's (SZSE:300535) Profit Is Only A Baseline For What They Can Achieve

Sichuan Dowell Science and Technology Inc.'s (SZSE:300535) strong earnings report was rewarded with a positive stock price move. We have done some analysis, and we found several positive factors beyond the profit numbers.

View our latest analysis for Sichuan Dowell Science and Technology

How Do Unusual Items Influence Profit?

To properly understand Sichuan Dowell Science and Technology's profit results, we need to consider the CN¥42m expense attributed 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. In the twelve months to March 2024, Sichuan Dowell Science and Technology had a big unusual items expense. As a result, we can surmise that the unusual items made its statutory profit significantly weaker 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 Sichuan Dowell Science and Technology.

Our Take On Sichuan Dowell Science and Technology's Profit Performance

As we mentioned previously, the Sichuan Dowell Science and Technology's profit was hampered by unusual items in the last year. Because of this, we think Sichuan Dowell Science and Technology's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! And one can definitely find a positive in the fact that it made a profit this year, despite losing money 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Case in point: We've spotted 3 warning signs for Sichuan Dowell Science and Technology you should be mindful of and 2 of these bad boys are a bit unpleasant.

This note has only looked at a single factor that sheds light on the nature of Sichuan Dowell Science and 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.