Soft earnings didn't appear to concern Sanxiang Impression Co., Ltd.'s (SZSE:000863) shareholders over the last week. We think that the softer headline numbers might be getting counterbalanced by some positive underlying factors.

The Impact Of Unusual Items On 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¥24m due to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Sanxiang Impression to produce a higher profit next year, all else being equal.

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

Unusual items (expenses) detracted from Sanxiang Impression's earnings over the last year, but we might see an improvement next year. Because of this, we think Sanxiang Impression's earnings potential is at least as good as it seems, and maybe even better! On the other hand, its EPS actually shrunk in 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. You'd be interested to know, that we found 2 warning signs for Sanxiang Impression and you'll want to know about these bad boys.

This note has only looked at a single factor that sheds light on the nature of Sanxiang Impression's profit. But there are plenty of other ways to inform your opinion of a company. 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.