Fujian Torch Electron Technology's (SHSE:603678) Soft Earnings Don't Show The Whole Picture

Shareholders appeared unconcerned with Fujian Torch Electron Technology Co., Ltd.'s (SHSE:603678) lackluster earnings report last week. We did some digging, and we believe the earnings are stronger than they seem.

See our latest analysis for Fujian Torch Electron Technology

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Fujian Torch Electron Technology's profit was reduced by CN¥67m, due to unusual items, over the last year. 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. If Fujian Torch Electron Technology doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming 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 Fujian Torch Electron Technology's Profit Performance

Because unusual items detracted from Fujian Torch Electron Technology's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Fujian Torch Electron Technology's earnings potential is at least as good as it seems, and maybe even better! On the other hand, its EPS actually shrunk in 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. In terms of investment risks, we've identified 2 warning signs with Fujian Torch Electron Technology, and understanding them should be part of your investment process.

This note has only looked at a single factor that sheds light on the nature of Fujian Torch Electron Technology'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.