The recent earnings posted by Shenzhen Kingsun Science & Technology Co.,Ltd (SZSE:300235) were solid, but the stock didn't move as much as we expected. However the statutory profit number doesn't tell the whole story, and we have found some factors which might be of concern to shareholders.

The Impact Of Unusual Items On Profit

For anyone who wants to understand Shenzhen Kingsun Science & TechnologyLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥4.6m worth of unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And that's as you'd expect, given these boosts are described as 'unusual'. If Shenzhen Kingsun Science & TechnologyLtd 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 Shenzhen Kingsun Science & TechnologyLtd.

Our Take On Shenzhen Kingsun Science & TechnologyLtd's Profit Performance

We'd posit that Shenzhen Kingsun Science & TechnologyLtd's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that Shenzhen Kingsun Science & TechnologyLtd's statutory profits are better than its underlying earnings power. The good news is that, its earnings per share increased by 44% 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example - Shenzhen Kingsun Science & TechnologyLtd has 1 warning sign we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Shenzhen Kingsun Science & TechnologyLtd's 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 that insiders are buying 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.