We Think That There Are More Issues For Leyard Optoelectronic (SZSE:300296) Than Just Sluggish Earnings

The subdued market reaction suggests that Leyard Optoelectronic Co., Ltd.'s (SZSE:300296) recent earnings didn't contain any surprises. We think that investors are worried about some weaknesses underlying the earnings.

View our latest analysis for Leyard Optoelectronic

The Impact Of Unusual Items On Profit

To properly understand Leyard Optoelectronic's profit results, we need to consider the CN¥31m gain attributed to unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. Which is hardly surprising, given the name. We can see that Leyard Optoelectronic's positive unusual items were quite significant relative to its profit in the year to June 2024. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

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 Leyard Optoelectronic's Profit Performance

As we discussed above, we think the significant positive unusual item makes Leyard Optoelectronic's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Leyard Optoelectronic's underlying earnings power is lower than its statutory profit. Sadly, its EPS was down over the last twelve months. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example - Leyard Optoelectronic has 3 warning signs we think you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Leyard Optoelectronic'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.