A lackluster earnings announcement from Shanghai Waigaoqiao Free Trade Zone Group Co., Ltd. (SHSE:600648) last week didn't sink the stock price. However, we believe that investors should be aware of some underlying factors which may be of concern.

The Impact Of Unusual Items On Profit

To properly understand Shanghai Waigaoqiao Free Trade Zone Group's profit results, we need to consider the CN¥193m gain attributed to unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. If Shanghai Waigaoqiao Free Trade Zone Group 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 Shanghai Waigaoqiao Free Trade Zone Group.

Our Take On Shanghai Waigaoqiao Free Trade Zone Group's Profit Performance

We'd posit that Shanghai Waigaoqiao Free Trade Zone Group's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that Shanghai Waigaoqiao Free Trade Zone Group's true underlying earnings power is actually less than its statutory profit. Sadly, its EPS was down over 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. If you want to do dive deeper into Shanghai Waigaoqiao Free Trade Zone Group, you'd also look into what risks it is currently facing. For instance, we've identified 4 warning signs for Shanghai Waigaoqiao Free Trade Zone Group (1 can't be ignored) you should be familiar with.

Today we've zoomed in on a single data point to better understand the nature of Shanghai Waigaoqiao Free Trade Zone Group'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 with significant insider holdings 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.