Investors Can Find Comfort In Dongguan Tarry ElectronicsLtd's (SZSE:300976) Earnings Quality

The market was pleased with the recent earnings report from Dongguan Tarry Electronics Co.,Ltd (SZSE:300976), despite the profit numbers being soft. We think that investors might be looking at some positive factors beyond the earnings numbers.

Check out our latest analysis for Dongguan Tarry ElectronicsLtd

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Dongguan Tarry ElectronicsLtd's profit was reduced by CN¥9.3m, 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 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 Tarry ElectronicsLtd to produce a higher profit next year, all else being equal.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Dongguan Tarry ElectronicsLtd.

Our Take On Dongguan Tarry ElectronicsLtd's Profit Performance

Unusual items (expenses) detracted from Dongguan Tarry ElectronicsLtd's earnings over the last year, but we might see an improvement next year. Because of this, we think Dongguan Tarry ElectronicsLtd's earnings potential is at least as good as it seems, and maybe even better! Unfortunately, though, its earnings per share actually fell back over the last year. 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. For example, we've found that Dongguan Tarry ElectronicsLtd has 3 warning signs (1 is potentially serious!) that deserve your attention before going any further with your analysis.

Today we've zoomed in on a single data point to better understand the nature of Dongguan Tarry ElectronicsLtd's profit. But there are plenty of other ways to inform your opinion of a company. 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.