The market seemed underwhelmed by the solid earnings posted by Citic Press Corporation (SZSE:300788) recently. Our analysis suggests that there are some reasons for hope that investors should be aware of.

How Do Unusual Items Influence Profit?

For anyone who wants to understand Citic Press' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥27m 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, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Citic Press to produce a higher profit next year, all else being equal.

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On Citic Press' Profit Performance

Unusual items (expenses) detracted from Citic Press' earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Citic Press' statutory profit actually understates its earnings potential! And on top of that, its earnings per share increased by 6.5% in the last year. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For instance, we've identified 2 warning signs for Citic Press (1 can't be ignored) you should be familiar with.

Today we've zoomed in on a single data point to better understand the nature of Citic Press' 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 with significant insider holdings 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.