China Dongxiang (Group)'s (HKG:3818) Earnings Offer More Than Meets The Eye

The stock was sluggish on the back of China Dongxiang (Group) Co., Ltd.'s (HKG:3818) recent earnings report. We have done some analysis, and found some encouraging factors that we believe the shareholders should consider.

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The Impact Of Unusual Items On Profit

To properly understand China Dongxiang (Group)'s profit results, we need to consider the CN¥13m expense attributed 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. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. 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 China Dongxiang (Group) 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 China Dongxiang (Group).

Our Take On China Dongxiang (Group)'s Profit Performance

Unusual items (expenses) detracted from China Dongxiang (Group)'s earnings over the last year, but we might see an improvement next year. Because of this, we think China Dongxiang (Group)'s earnings potential is at least as good as it seems, and maybe even better! And it's also positive that the company showed enough improvement to book a profit this year, after losing money 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 want to do dive deeper into China Dongxiang (Group), you'd also look into what risks it is currently facing. Our analysis shows 2 warning signs for China Dongxiang (Group) (1 is potentially serious!) and we strongly recommend you look at them before investing.

Today we've zoomed in on a single data point to better understand the nature of China Dongxiang (Group)'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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.