The market for Hubei Forbon Technology Co.,Ltd.'s (SZSE:300387) shares didn't move much after it posted weak earnings recently. Our analysis suggests that while the profits are soft, the foundations of the business are strong.

Check out our latest analysis for Hubei Forbon TechnologyLtd

How Do Unusual Items Influence Profit?

For anyone who wants to understand Hubei Forbon TechnologyLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥7.7m due to unusual items. 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, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Hubei Forbon TechnologyLtd 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 Hubei Forbon TechnologyLtd.

Our Take On Hubei Forbon TechnologyLtd's Profit Performance

Unusual items (expenses) detracted from Hubei Forbon TechnologyLtd's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Hubei Forbon TechnologyLtd's statutory profit actually understates its earnings potential! Unfortunately, though, its earnings per share actually fell back over the 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Our analysis shows 4 warning signs for Hubei Forbon TechnologyLtd (1 is significant!) and we strongly recommend you look at these before investing.

Today we've zoomed in on a single data point to better understand the nature of Hubei Forbon TechnologyLtd'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.