A lackluster earnings announcement from Zhejiang Fuchunjiang Environmental Thermoelectric Co.,LTD. (SZSE:002479) last week didn't sink the stock price. However, we believe that investors should be aware of some underlying factors which may be of concern.

The Impact Of Unusual Items On Profit

To properly understand Zhejiang Fuchunjiang Environmental ThermoelectricLTD's profit results, we need to consider the CN¥74m gain attributed to unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And that's as you'd expect, given these boosts are described as 'unusual'. If Zhejiang Fuchunjiang Environmental ThermoelectricLTD 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 Zhejiang Fuchunjiang Environmental ThermoelectricLTD.

Our Take On Zhejiang Fuchunjiang Environmental ThermoelectricLTD's Profit Performance

We'd posit that Zhejiang Fuchunjiang Environmental ThermoelectricLTD's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that Zhejiang Fuchunjiang Environmental ThermoelectricLTD's true underlying earnings power is actually less than its statutory profit. Sadly, its EPS was down over the last twelve months. 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'd like to know more about Zhejiang Fuchunjiang Environmental ThermoelectricLTD as a business, it's important to be aware of any risks it's facing. In terms of investment risks, we've identified 3 warning signs with Zhejiang Fuchunjiang Environmental ThermoelectricLTD, and understanding these bad boys should be part of your investment process.

Today we've zoomed in on a single data point to better understand the nature of Zhejiang Fuchunjiang Environmental ThermoelectricLTD's profit. But there are plenty of other ways to inform your opinion of a company. 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 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.