Shanghai Fudan Forward S&T Co., Ltd (SHSE:600624) just released a solid earnings report, and the stock displayed some strength. While the profit numbers were good, our analysis has found some concerning factors that shareholders should be aware of.

The Impact Of Unusual Items On Profit

For anyone who wants to understand Shanghai Fudan Forward S&T's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥46m worth of 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 analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's as you'd expect, given these boosts are described as 'unusual'. Shanghai Fudan Forward S&T had a rather significant contribution from unusual items relative to its profit to June 2024. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Shanghai Fudan Forward S&T.

Our Take On Shanghai Fudan Forward S&T's Profit Performance

As we discussed above, we think the significant positive unusual item makes Shanghai Fudan Forward S&T's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Shanghai Fudan Forward S&T's underlying earnings power is lower than its statutory profit. The good news is that it earned a profit in the last twelve months, despite its previous loss. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For instance, we've identified 3 warning signs for Shanghai Fudan Forward S&T (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 Shanghai Fudan Forward S&T'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.