Zhejiang Feida Environmental Science & Technology Co., Ltd. (SHSE:600526) announced strong profits, but the stock was stagnant. Our analysis suggests that shareholders have noticed something concerning in the numbers.

How Do Unusual Items Influence Profit?

To properly understand Zhejiang Feida Environmental Science & Technology's profit results, we need to consider the CN¥34m gain attributed to unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. 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, after all, that's exactly what the accounting terminology implies. If Zhejiang Feida Environmental Science & Technology 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 Feida Environmental Science & Technology.

Our Take On Zhejiang Feida Environmental Science & Technology's Profit Performance

Arguably, Zhejiang Feida Environmental Science & Technology's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Zhejiang Feida Environmental Science & Technology's statutory profits are better than its underlying earnings power. But on the bright side, its earnings per share have grown at an extremely impressive rate over the last three years. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example - Zhejiang Feida Environmental Science & Technology has 1 warning sign we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Zhejiang Feida Environmental Science & Technology'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. 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.