Chongqing Changjiang River Moulding Material (Group) Co., Ltd. (SZSE:001296) announced strong profits, but the stock was stagnant. Our analysis suggests that shareholders have noticed something concerning in the numbers.

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Chongqing Changjiang River Moulding Material (Group)'s profit received a boost of CN¥15m in unusual items, over the last year. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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. If Chongqing Changjiang River Moulding Material (Group) 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 Chongqing Changjiang River Moulding Material (Group).

Our Take On Chongqing Changjiang River Moulding Material (Group)'s Profit Performance

We'd posit that Chongqing Changjiang River Moulding Material (Group)'s statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that Chongqing Changjiang River Moulding Material (Group)'s statutory profits are better than its underlying earnings power. But the happy news is that, while acknowledging we have to look beyond the statutory numbers, those numbers are still improving, with EPS growing at a very high rate 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. If you want to do dive deeper into Chongqing Changjiang River Moulding Material (Group), you'd also look into what risks it is currently facing. In terms of investment risks, we've identified 1 warning sign with Chongqing Changjiang River Moulding Material (Group), and understanding it should be part of your investment process.

This note has only looked at a single factor that sheds light on the nature of Chongqing Changjiang River Moulding Material (Group)'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. 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.