Shareholders Can Be Confident That China Daye Non-Ferrous Metals Mining's (HKG:661) Earnings Are High Quality

Even though China Daye Non-Ferrous Metals Mining Limited's (HKG:661) recent earnings release was robust, the market didn't seem to notice. Investors are probably missing some underlying factors which are encouraging for the future of the company.

We've discovered 3 warning signs about China Daye Non-Ferrous Metals Mining. View them for free.

How Do Unusual Items Influence Profit?

Importantly, our data indicates that China Daye Non-Ferrous Metals Mining's profit was reduced by CN¥133m, 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 China Daye Non-Ferrous Metals Mining 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 Daye Non-Ferrous Metals Mining.

Our Take On China Daye Non-Ferrous Metals Mining's Profit Performance

Unusual items (expenses) detracted from China Daye Non-Ferrous Metals Mining's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that China Daye Non-Ferrous Metals Mining's statutory profit actually understates its earnings potential! And it's also positive that the company showed enough improvement to book a profit this year, after losing money 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. Case in point: We've spotted 3 warning signs for China Daye Non-Ferrous Metals Mining you should be mindful of and 1 of them is significant.

Today we've zoomed in on a single data point to better understand the nature of China Daye Non-Ferrous Metals Mining'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 with significant insider holdings 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.