Guangdong Fenghua Advanced Technology (Holding)'s (SZSE:000636) Earnings May Just Be The Starting Point

Even though Guangdong Fenghua Advanced Technology (Holding) Co., Ltd. (SZSE:000636 ) posted strong earnings, investors appeared to be underwhelmed. We did some digging and actually think they are being unnecessarily pessimistic.

Check out our latest analysis for Guangdong Fenghua Advanced Technology (Holding)

How Do Unusual Items Influence Profit?

To properly understand Guangdong Fenghua Advanced Technology (Holding)'s profit results, we need to consider the CN¥27m expense attributed to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect Guangdong Fenghua Advanced Technology (Holding) to produce a higher profit next year, all else being equal.

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 Guangdong Fenghua Advanced Technology (Holding)'s Profit Performance

Because unusual items detracted from Guangdong Fenghua Advanced Technology (Holding)'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 Guangdong Fenghua Advanced Technology (Holding)'s 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 an extremely impressive rate over the last year. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. While it's really important to consider how well a company's statutory earnings represent its true earnings power, it's also worth taking a look at what analysts are forecasting for the future. At Simply Wall St, we have analyst estimates which you can view by clicking here.

Today we've zoomed in on a single data point to better understand the nature of Guangdong Fenghua Advanced Technology (Holding)'s profit. But there are plenty of other ways to inform your opinion of a company. 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. 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.

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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.