Shenzhen JPT Opto-Electronics' (SHSE:688025) Strong Earnings Are Of Good Quality

The subdued stock price reaction suggests that Shenzhen JPT Opto-Electronics Co., Ltd.'s (SHSE:688025) strong earnings didn't offer any surprises. Investors are probably missing some underlying factors which are encouraging for the future of the company.

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The Impact Of Unusual Items On Profit

Importantly, our data indicates that Shenzhen JPT Opto-Electronics' profit was reduced by CN¥54m, due to unusual items, over the last year. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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 Shenzhen JPT Opto-Electronics 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 Shenzhen JPT Opto-Electronics' Profit Performance

Unusual items (expenses) detracted from Shenzhen JPT Opto-Electronics' earnings over the last year, but we might see an improvement next year. Because of this, we think Shenzhen JPT Opto-Electronics' earnings potential is at least as good as it seems, and maybe even better! And on top of that, its earnings per share have grown at 41% per year over the last three years. 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. Case in point: We've spotted 2 warning signs for Shenzhen JPT Opto-Electronics you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Shenzhen JPT Opto-Electronics' 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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.