Concerns Surrounding Shenzhen Absen OptoelectronicLtd's (SZSE:300389) Performance

Shenzhen Absen Optoelectronic Co.,Ltd.'s (SZSE:300389) healthy profit numbers didn't contain any surprises for investors. However the statutory profit number doesn't tell the whole story, and we have found some factors which might be of concern to shareholders.

View our latest analysis for Shenzhen Absen OptoelectronicLtd

The Impact Of Unusual Items On Profit

For anyone who wants to understand Shenzhen Absen OptoelectronicLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥19m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's as you'd expect, given these boosts are described as 'unusual'. If Shenzhen Absen OptoelectronicLtd doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current 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 Absen OptoelectronicLtd's Profit Performance

Arguably, Shenzhen Absen OptoelectronicLtd's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Shenzhen Absen OptoelectronicLtd's statutory profits are better than its underlying earnings power. The good news is that, its earnings per share increased by 13% in 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. So while earnings quality is important, it's equally important to consider the risks facing Shenzhen Absen OptoelectronicLtd at this point in time. Case in point: We've spotted 2 warning signs for Shenzhen Absen OptoelectronicLtd you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Shenzhen Absen OptoelectronicLtd'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.