Investors were underwhelmed by the solid earnings posted by Alpha Group (SZSE:002292) recently. Our analysis says that investors should be optimistic, as the strong profit is built on solid foundations.

How Do Unusual Items Influence Profit?

To properly understand Alpha Group's profit results, we need to consider the CN¥52m expense attributed to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. If Alpha Group doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On Alpha Group's Profit Performance

Unusual items (expenses) detracted from Alpha Group's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Alpha Group's statutory profit actually understates its earnings potential! And one can definitely find a positive in the fact that it made a profit this year, despite losing money last year. 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 Alpha Group as a business, it's important to be aware of any risks it's facing. In terms of investment risks, we've identified 1 warning sign with Alpha Group, and understanding this should be part of your investment process.

Today we've zoomed in on a single data point to better understand the nature of Alpha Group'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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.