The market for TES Touch Embedded Solutions (Xiamen) Co., Ltd.'s (SZSE:003019) stock was strong after it released a healthy earnings report last week. While the profit numbers were good, our analysis has found some concerning factors that shareholders should be aware of.

How Do Unusual Items Influence Profit?

Importantly, our data indicates that TES Touch Embedded Solutions (Xiamen)'s profit received a boost of CN¥40m 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. 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. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of TES Touch Embedded Solutions (Xiamen).

Our Take On TES Touch Embedded Solutions (Xiamen)'s Profit Performance

Arguably, TES Touch Embedded Solutions (Xiamen)'s statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that TES Touch Embedded Solutions (Xiamen)'s true underlying earnings power is actually less than its statutory profit. But on the bright side, its earnings per share have grown at an extremely impressive rate over the last three years. 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 TES Touch Embedded Solutions (Xiamen) as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 1 warning sign for TES Touch Embedded Solutions (Xiamen) you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of TES Touch Embedded Solutions (Xiamen)'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.