Anhui Landun Photoelectron's (SZSE:300862) Conservative Accounting Might Explain Soft Earnings

The market was pleased with the recent earnings report from Anhui Landun Photoelectron Co., Ltd. (SZSE:300862), despite the profit numbers being soft. We think that investors might be looking at some positive factors beyond the earnings numbers.

View our latest analysis for Anhui Landun Photoelectron

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Anhui Landun Photoelectron's profit was reduced by CN¥3.9m, due to unusual items, over the last year. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. If Anhui Landun Photoelectron doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Anhui Landun Photoelectron.

Our Take On Anhui Landun Photoelectron's Profit Performance

Because unusual items detracted from Anhui Landun Photoelectron's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Anhui Landun Photoelectron's statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in the last twelve months. 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 Anhui Landun Photoelectron at this point in time. At Simply Wall St, we found 1 warning sign for Anhui Landun Photoelectron and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of Anhui Landun Photoelectron'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 that insiders are buying to be useful.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.