The market seemed underwhelmed by last week's earnings announcement from Tongdao Liepin Group (HKG:6100) despite the healthy numbers. We did some digging, and we think that investors are missing some encouraging factors in the underlying numbers.
The Impact Of Unusual Items On Profit
Importantly, our data indicates that Tongdao Liepin Group's profit was reduced by CN¥22m, due to unusual items, over the last year. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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. If Tongdao Liepin Group 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 Tongdao Liepin Group's Profit Performance
Because unusual items detracted from Tongdao Liepin Group'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 Tongdao Liepin Group's statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at an extremely impressive rate over the 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. If you want to do dive deeper into Tongdao Liepin Group, you'd also look into what risks it is currently facing. Case in point: We've spotted 1 warning sign for Tongdao Liepin Group you should be aware of.
Today we've zoomed in on a single data point to better understand the nature of Tongdao Liepin 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. 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.