Soft earnings didn't appear to concern Singatron Electronic (China) Co., Ltd.'s (SZSE:301329) shareholders over the last week. We did some digging, and we believe the earnings are stronger than they seem.

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Singatron Electronic (China)'s profit was reduced by CN¥9.9m, 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 Singatron Electronic (China) 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 Singatron Electronic (China).

Our Take On Singatron Electronic (China)'s Profit Performance

Because unusual items detracted from Singatron Electronic (China)'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 Singatron Electronic (China)'s statutory profit actually understates its earnings potential! Unfortunately, though, its earnings per share actually fell back over 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. If you'd like to know more about Singatron Electronic (China) as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 2 warning signs for Singatron Electronic (China) you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Singatron Electronic (China)'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 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.