The market for Guangdong Insight Brand Marketing Group Co.,Ltd.'s (SZSE:300781) stock was strong after it released a healthy earnings report last week. However, we think that shareholders should be cautious as we found some worrying factors underlying the profit.

How Do Unusual Items Influence Profit?

To properly understand Guangdong Insight Brand Marketing GroupLtd's profit results, we need to consider the CN¥12m 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 Guangdong Insight Brand Marketing GroupLtd 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 Guangdong Insight Brand Marketing GroupLtd.

Our Take On Guangdong Insight Brand Marketing GroupLtd's Profit Performance

Arguably, Guangdong Insight Brand Marketing GroupLtd's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Guangdong Insight Brand Marketing GroupLtd's true underlying earnings power is actually less than its statutory profit. The good news is that, its earnings per share increased by 36% in the last year. 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. At Simply Wall St, we found 2 warning signs for Guangdong Insight Brand Marketing GroupLtd and we think they deserve your attention.

This note has only looked at a single factor that sheds light on the nature of Guangdong Insight Brand Marketing GroupLtd'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. 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.