Sanxiang Impression Co., Ltd.'s (SZSE:000863) solid earnings announcement recently didn't do much to the stock price. Our analysis suggests that shareholders might be missing some positive underlying factors in the earnings report.

How Do Unusual Items Influence Profit?

For anyone who wants to understand Sanxiang Impression's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥55m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. In the twelve months to March 2024, Sanxiang Impression had a big unusual items expense. As a result, we can surmise that the unusual items made its statutory profit significantly weaker than it would otherwise be.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Sanxiang Impression.

Our Take On Sanxiang Impression's Profit Performance

As we mentioned previously, the Sanxiang Impression's profit was hampered by unusual items in the last year. Because of this, we think Sanxiang Impression's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! And the EPS is up 56% 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Every company has risks, and we've spotted 2 warning signs for Sanxiang Impression (of which 1 is potentially serious!) you should know about.

Today we've zoomed in on a single data point to better understand the nature of Sanxiang Impression's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.