Despite Shandong Sacred Sun Power Sources Co.,Ltd's (SZSE:002580) recent earnings report having lackluster headline numbers, the market responded positively. Sometimes, shareholders are willing to ignore soft numbers with the hope that they will improve, but our analysis suggests this is unlikely for Shandong Sacred Sun Power SourcesLtd.

The Impact Of Unusual Items On Profit

For anyone who wants to understand Shandong Sacred Sun Power SourcesLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥18m worth of 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. Which is hardly surprising, given the name. If Shandong Sacred Sun Power SourcesLtd 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 Shandong Sacred Sun Power SourcesLtd.

Our Take On Shandong Sacred Sun Power SourcesLtd's Profit Performance

Arguably, Shandong Sacred Sun Power SourcesLtd's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Shandong Sacred Sun Power SourcesLtd's true underlying earnings power is actually less than its statutory profit. But the good news is that its EPS growth over the last three years has been very impressive. 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 if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Every company has risks, and we've spotted 1 warning sign for Shandong Sacred Sun Power SourcesLtd you should know about.

Today we've zoomed in on a single data point to better understand the nature of Shandong Sacred Sun Power SourcesLtd'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 with high insider ownership.

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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.