Soft earnings didn't appear to concern Wuxi Commercial Mansion Grand Orient Co., Ltd.'s (SHSE:600327) shareholders over the last week. Our analysis suggests that while the profits are soft, the foundations of the business are strong.

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Wuxi Commercial Mansion Grand Orient's profit was reduced by CN¥26m, due to unusual items, over the last year. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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 Wuxi Commercial Mansion Grand Orient 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 Wuxi Commercial Mansion Grand Orient.

Our Take On Wuxi Commercial Mansion Grand Orient's Profit Performance

Because unusual items detracted from Wuxi Commercial Mansion Grand Orient'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 Wuxi Commercial Mansion Grand Orient'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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For instance, we've identified 2 warning signs for Wuxi Commercial Mansion Grand Orient (1 is a bit unpleasant) you should be familiar with.

Today we've zoomed in on a single data point to better understand the nature of Wuxi Commercial Mansion Grand Orient's profit. But there are plenty of other ways to inform your opinion of a company. 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. 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.