Shenzhen Jufei Optoelectronics' (SZSE:300303) Profits May Not Reveal Underlying Issues

The recent earnings posted by Shenzhen Jufei Optoelectronics Co., Ltd. (SZSE:300303) were solid, but the stock didn't move as much as we expected. We believe that shareholders have noticed some concerning factors beyond the statutory profit numbers.

See our latest analysis for Shenzhen Jufei Optoelectronics

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Shenzhen Jufei Optoelectronics' profit received a boost of CN¥56m in unusual items, over the last year. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Shenzhen Jufei Optoelectronics.

Our Take On Shenzhen Jufei Optoelectronics' Profit Performance

We'd posit that Shenzhen Jufei Optoelectronics' statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that Shenzhen Jufei Optoelectronics' statutory profits are better than its underlying earnings power. The good news is that, its earnings per share increased by 25% 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. Be aware that Shenzhen Jufei Optoelectronics is showing 4 warning signs in our investment analysis and 1 of those shouldn't be ignored...

Today we've zoomed in on a single data point to better understand the nature of Shenzhen Jufei Optoelectronics' 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 with significant insider holdings to be useful.

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.