Luenmei QuantumLtd's (SHSE:600167) Conservative Accounting Might Explain Soft Earnings

The market was pleased with the recent earnings report from Luenmei Quantum Co.,Ltd (SHSE:600167), despite the profit numbers being soft. However, we think the company is showing some signs that things are more promising than they seem.

View our latest analysis for Luenmei QuantumLtd

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Luenmei QuantumLtd's profit was reduced by CN¥103m, due to unusual items, over the last year. 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 Luenmei QuantumLtd 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 Luenmei QuantumLtd's Profit Performance

Because unusual items detracted from Luenmei QuantumLtd'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 Luenmei QuantumLtd's statutory profit actually understates its earnings potential! Unfortunately, though, its earnings per share actually fell back over the last year. 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. If you'd like to know more about Luenmei QuantumLtd as a business, it's important to be aware of any risks it's facing. For example - Luenmei QuantumLtd has 1 warning sign we think you should be aware of.

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