Impressive Earnings May Not Tell The Whole Story For Zhejiang Crystal-Optech (SZSE:002273)

Zhejiang Crystal-Optech Co., Ltd (SZSE:002273) just reported some strong earnings, and the market reacted accordingly with a healthy uplift in the share price. However, we think that shareholders may be missing some concerning details in the numbers.

See our latest analysis for Zhejiang Crystal-Optech

How Do Unusual Items Influence Profit?

To properly understand Zhejiang Crystal-Optech's profit results, we need to consider the CN¥99m gain attributed to unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. 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).

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 Zhejiang Crystal-Optech's Profit Performance

We'd posit that Zhejiang Crystal-Optech's 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 Zhejiang Crystal-Optech's statutory profits are better than its underlying earnings power. But on the bright side, its earnings per share have grown at an extremely impressive rate over the last three years. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Case in point: We've spotted 1 warning sign for Zhejiang Crystal-Optech you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Zhejiang Crystal-Optech's 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.