Shareholders appeared unconcerned with Fujian Dongbai (Group) Co.,Ltd.'s (SHSE:600693) lackluster earnings report last week. Our analysis suggests that while the profits are soft, the foundations of the business are strong.
The Impact Of Unusual Items On Profit
Importantly, our data indicates that Fujian Dongbai (Group)Ltd's profit was reduced by CN¥68m, 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. 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 Fujian Dongbai (Group)Ltd doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Fujian Dongbai (Group)Ltd.
Our Take On Fujian Dongbai (Group)Ltd's Profit Performance
Unusual items (expenses) detracted from Fujian Dongbai (Group)Ltd's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Fujian Dongbai (Group)Ltd's statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in the last twelve months. 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, Fujian Dongbai (Group)Ltd has 3 warning signs (and 2 which are a bit unpleasant) we think you should know about.
Today we've zoomed in on a single data point to better understand the nature of Fujian Dongbai (Group)Ltd'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 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.
