Shenzhen Best of Best Holdings Co.,Ltd.'s (SZSE:001298) stock was strong despite it releasing a soft earnings report last week. We think that investors might be looking at some positive factors beyond the earnings numbers.

How Do Unusual Items Influence Profit?

To properly understand Shenzhen Best of Best HoldingsLtd's profit results, we need to consider the CN¥20m expense attributed 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. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect Shenzhen Best of Best HoldingsLtd 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 Shenzhen Best of Best HoldingsLtd.

Our Take On Shenzhen Best of Best HoldingsLtd's Profit Performance

Because unusual items detracted from Shenzhen Best of Best HoldingsLtd'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 Shenzhen Best of Best HoldingsLtd's statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in 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. If you want to do dive deeper into Shenzhen Best of Best HoldingsLtd, you'd also look into what risks it is currently facing. For instance, we've identified 4 warning signs for Shenzhen Best of Best HoldingsLtd (1 is potentially serious) you should be familiar with.

This note has only looked at a single factor that sheds light on the nature of Shenzhen Best of Best HoldingsLtd's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.

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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.