We Think That There Are More Issues For Hangzhou DPtech TechnologiesLtd (SZSE:300768) Than Just Sluggish Earnings

The subdued market reaction suggests that Hangzhou DPtech Technologies Co.,Ltd.'s (SZSE:300768) recent earnings didn't contain any surprises. However, we believe that investors should be aware of some underlying factors which may be of concern.

See our latest analysis for Hangzhou DPtech TechnologiesLtd

The Impact Of Unusual Items On Profit

For anyone who wants to understand Hangzhou DPtech TechnologiesLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥6.7m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And, after all, that's exactly what the accounting terminology implies. 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).

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 Hangzhou DPtech TechnologiesLtd's Profit Performance

We'd posit that Hangzhou DPtech TechnologiesLtd's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that Hangzhou DPtech TechnologiesLtd's true underlying earnings power is actually less than its statutory profit. Sadly, its EPS was down over the last twelve months. 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 while earnings quality is important, it's equally important to consider the risks facing Hangzhou DPtech TechnologiesLtd at this point in time. In terms of investment risks, we've identified 1 warning sign with Hangzhou DPtech TechnologiesLtd, and understanding this should be part of your investment process.

This note has only looked at a single factor that sheds light on the nature of Hangzhou DPtech TechnologiesLtd's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.