Shareholders appeared unconcerned with Jiangsu NanFang Precision Co.,Ltd.'s (SZSE:002553) lackluster earnings report last week. Our analysis suggests that while the profits are soft, the foundations of the business are strong.

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Jiangsu NanFang PrecisionLtd's profit was reduced by CN¥91m, due to unusual items, over the last year. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. Jiangsu NanFang PrecisionLtd took a rather significant hit from unusual items in the year to December 2023. All else being equal, this would likely have the effect of making the statutory profit look worse than its underlying earnings power.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Jiangsu NanFang PrecisionLtd.

Our Take On Jiangsu NanFang PrecisionLtd's Profit Performance

As we mentioned previously, the Jiangsu NanFang PrecisionLtd's profit was hampered by unusual items in the last year. Based on this observation, we consider it possible that Jiangsu NanFang PrecisionLtd's statutory profit actually understates its earnings potential! 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. To that end, you should learn about the 5 warning signs we've spotted with Jiangsu NanFang PrecisionLtd (including 2 which don't sit too well with us).

This note has only looked at a single factor that sheds light on the nature of Jiangsu NanFang PrecisionLtd'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 that insiders are buying.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.