Tjk Machinery (Tianjin) Co., Ltd.'s (SZSE:300823) strong earnings report was rewarded with a positive stock price move. We have done some analysis, and we found several positive factors beyond the profit numbers.

The Impact Of Unusual Items On Profit

For anyone who wants to understand Tjk Machinery (Tianjin)'s profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥12m 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. 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 expenses don't come up again, we'd therefore expect Tjk Machinery (Tianjin) 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 Tjk Machinery (Tianjin).

Our Take On Tjk Machinery (Tianjin)'s Profit Performance

Because unusual items detracted from Tjk Machinery (Tianjin)'s earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Tjk Machinery (Tianjin)'s statutory profit actually understates its earnings potential! And the EPS is up 54% over the last twelve months. 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. So while earnings quality is important, it's equally important to consider the risks facing Tjk Machinery (Tianjin) at this point in time. For example - Tjk Machinery (Tianjin) has 3 warning signs we think you should be aware of.

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