Following the solid earnings report from Suzhou Etron Technologies Co.,Ltd. (SHSE:603380), the market responded by bidding up the stock price. Despite this, our analysis suggests that there are some factors weakening the foundations of those good profit numbers.

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Suzhou Etron TechnologiesLtd's profit received a boost of CN¥37m in unusual items, over the last year. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Suzhou Etron TechnologiesLtd.

Our Take On Suzhou Etron TechnologiesLtd's Profit Performance

Arguably, Suzhou Etron TechnologiesLtd's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Suzhou Etron TechnologiesLtd's true underlying earnings power is actually less than its statutory profit. And we are pleased to note that EPS is at least heading in the right direction in the alst twelve months. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Every company has risks, and we've spotted 2 warning signs for Suzhou Etron TechnologiesLtd you should know about.

This note has only looked at a single factor that sheds light on the nature of Suzhou Etron TechnologiesLtd's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.