Xinjiang Daqo New EnergyLtd's (SHSE:688303) Anemic Earnings Might Be Worse Than You Think

A lackluster earnings announcement from Xinjiang Daqo New Energy Co.,Ltd. (SHSE:688303) last week didn't sink the stock price. However, we believe that investors should be aware of some underlying factors which may be of concern.

View our latest analysis for Xinjiang Daqo New EnergyLtd

The Impact Of Unusual Items On Profit

For anyone who wants to understand Xinjiang Daqo New EnergyLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥574m 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 crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. Which is hardly surprising, given the name. If Xinjiang Daqo New EnergyLtd 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 Xinjiang Daqo New EnergyLtd's Profit Performance

Arguably, Xinjiang Daqo New EnergyLtd's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Xinjiang Daqo New EnergyLtd's statutory profits are better than its underlying earnings power. But the good news is that its EPS growth over the last three years has been very impressive. 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. At Simply Wall St, we found 2 warning signs for Xinjiang Daqo New EnergyLtd and we think they deserve your attention.

This note has only looked at a single factor that sheds light on the nature of Xinjiang Daqo New EnergyLtd'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. 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.