We Think China Datang Corporation Renewable Power's (HKG:1798) Healthy Earnings Might Be Conservative

China Datang Corporation Renewable Power Co., Limited's (HKG:1798) recent earnings report didn't offer any surprises, with the shares unchanged over the last week. Our analysis suggests that shareholders might be missing some positive underlying factors in the earnings report.

View our latest analysis for China Datang Corporation Renewable Power

How Do Unusual Items Influence Profit?

For anyone who wants to understand China Datang Corporation Renewable Power's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥605m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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. If China Datang Corporation Renewable Power doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

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 China Datang Corporation Renewable Power's Profit Performance

Unusual items (expenses) detracted from China Datang Corporation Renewable Power's earnings over the last year, but we might see an improvement next year. Because of this, we think China Datang Corporation Renewable Power's earnings potential is at least as good as it seems, and maybe even better! And on top of that, its earnings per share increased by 25% in the last year. 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 if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example, we've found that China Datang Corporation Renewable Power has 3 warning signs (1 can't be ignored!) that deserve your attention before going any further with your analysis.

This note has only looked at a single factor that sheds light on the nature of China Datang Corporation Renewable Power's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.

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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.
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