Shanghai Kaichuang Marine International Co., Ltd. (SHSE:600097) just reported some strong earnings, and the market reacted accordingly with a healthy uplift in the share price. We did some analysis and think that investors are missing some details hidden beneath the profit numbers.

The Impact Of Unusual Items On Profit

To properly understand Shanghai Kaichuang Marine International's profit results, we need to consider the CN¥18m gain attributed to unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. If Shanghai Kaichuang Marine International doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Shanghai Kaichuang Marine International.

Our Take On Shanghai Kaichuang Marine International's Profit Performance

Arguably, Shanghai Kaichuang Marine International's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Shanghai Kaichuang Marine International's true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 5.1% per annum growth in EPS for the last three. 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. So while earnings quality is important, it's equally important to consider the risks facing Shanghai Kaichuang Marine International at this point in time. To that end, you should learn about the 3 warning signs we've spotted with Shanghai Kaichuang Marine International (including 1 which is a bit unpleasant).

Today we've zoomed in on a single data point to better understand the nature of Shanghai Kaichuang Marine International'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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.

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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.