The subdued market reaction suggests that Shanghai Conglin Environmental Protection Technology Co., Ltd.'s (SHSE:688370) recent earnings didn't contain any surprises. 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 Conglin Environmental Protection Technology's profit results, we need to consider the CN¥9.8m 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. 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. And that's as you'd expect, given these boosts are described as 'unusual'. If Shanghai Conglin Environmental Protection Technology 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 Conglin Environmental Protection Technology.

Our Take On Shanghai Conglin Environmental Protection Technology's Profit Performance

Arguably, Shanghai Conglin Environmental Protection Technology's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Shanghai Conglin Environmental Protection Technology's true underlying earnings power is actually less than its statutory profit. Sadly, its EPS was down over the last twelve months. 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. If you'd like to know more about Shanghai Conglin Environmental Protection Technology as a business, it's important to be aware of any risks it's facing. For instance, we've identified 4 warning signs for Shanghai Conglin Environmental Protection Technology (1 is a bit concerning) you should be familiar with.

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