Investors were disappointed by JiangXi BaiSheng Intelligent Technology Co., Ltd.'s (SZSE:301083 ) latest earnings release. Our analysis has found some reasons to be concerned, beyond the weak headline numbers.

How Do Unusual Items Influence Profit?

Importantly, our data indicates that JiangXi BaiSheng Intelligent Technology's profit received a boost of CN¥3.6m in unusual items, over the last year. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. Which is hardly surprising, given the name. 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 JiangXi BaiSheng Intelligent Technology.

Our Take On JiangXi BaiSheng Intelligent Technology's Profit Performance

Arguably, JiangXi BaiSheng Intelligent Technology's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that JiangXi BaiSheng Intelligent Technology's true underlying earnings power is actually less than its statutory profit. In further bad news, its earnings per share decreased in the last year. 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. So while earnings quality is important, it's equally important to consider the risks facing JiangXi BaiSheng Intelligent Technology at this point in time. For instance, we've identified 3 warning signs for JiangXi BaiSheng Intelligent Technology (2 are potentially serious) you should be familiar with.

Today we've zoomed in on a single data point to better understand the nature of JiangXi BaiSheng Intelligent Technology'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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.