DongGuan YuTong Optical TechnologyLtd's (SZSE:300790) Conservative Accounting Might Explain Soft Earnings

Soft earnings didn't appear to concern DongGuan YuTong Optical Technology Co.,Ltd.'s (SZSE:300790) shareholders over the last week. We did some digging, and we believe the earnings are stronger than they seem.

See our latest analysis for DongGuan YuTong Optical TechnologyLtd

How Do Unusual Items Influence Profit?

For anyone who wants to understand DongGuan YuTong Optical TechnologyLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥30m due 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. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. 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 DongGuan YuTong Optical TechnologyLtd 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 DongGuan YuTong Optical TechnologyLtd's Profit Performance

Unusual items (expenses) detracted from DongGuan YuTong Optical TechnologyLtd's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that DongGuan YuTong Optical TechnologyLtd's statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in the last twelve months. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. To that end, you should learn about the 3 warning signs we've spotted with DongGuan YuTong Optical TechnologyLtd (including 1 which is a bit unpleasant).

Today we've zoomed in on a single data point to better understand the nature of DongGuan YuTong Optical TechnologyLtd'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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.

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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.