China Railway Special Cargo Logistics Co., Ltd.'s (SZSE:001213) robust earnings report didn't manage to move the market for its stock. We did some digging, and we found some concerning factors in the details.

How Do Unusual Items Influence Profit?

To properly understand China Railway Special Cargo Logistics' profit results, we need to consider the CN¥71m 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. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. 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 China Railway Special Cargo Logistics.

Our Take On China Railway Special Cargo Logistics' Profit Performance

Arguably, China Railway Special Cargo Logistics' statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that China Railway Special Cargo Logistics' 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. If you'd like to know more about China Railway Special Cargo Logistics as a business, it's important to be aware of any risks it's facing. You'd be interested to know, that we found 1 warning sign for China Railway Special Cargo Logistics and you'll want to know about it.

Today we've zoomed in on a single data point to better understand the nature of China Railway Special Cargo Logistics' 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.