Jiangsu Xiehe Electronic Co.,Ltd.'s (SHSE:605258) robust earnings report didn't manage to move the market for its stock. We did some digging, and we found some concerning factors in the details.

The Impact Of Unusual Items On Profit

To properly understand Jiangsu Xiehe ElectronicLtd's profit results, we need to consider the CN¥9.5m 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 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'. If Jiangsu Xiehe ElectronicLtd 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 Jiangsu Xiehe ElectronicLtd.

Our Take On Jiangsu Xiehe ElectronicLtd's Profit Performance

We'd posit that Jiangsu Xiehe ElectronicLtd's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that Jiangsu Xiehe ElectronicLtd's statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 35% EPS growth 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. If you want to do dive deeper into Jiangsu Xiehe ElectronicLtd, you'd also look into what risks it is currently facing. Be aware that Jiangsu Xiehe ElectronicLtd is showing 2 warning signs in our investment analysis and 1 of those is a bit concerning...

Today we've zoomed in on a single data point to better understand the nature of Jiangsu Xiehe ElectronicLtd'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. 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.