Soft earnings didn't appear to concern Shanghai New Huang Pu Industrial Group Co., Ltd.'s (SHSE:600638) shareholders over the last week. We think that the softer headline numbers might be getting counterbalanced by some positive underlying factors.

How Do Unusual Items Influence Profit?

To properly understand Shanghai New Huang Pu Industrial Group's profit results, we need to consider the CN¥19m 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. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. If Shanghai New Huang Pu Industrial Group doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Shanghai New Huang Pu Industrial Group.

Our Take On Shanghai New Huang Pu Industrial Group's Profit Performance

Unusual items (expenses) detracted from Shanghai New Huang Pu Industrial Group's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Shanghai New Huang Pu Industrial Group's statutory profit actually understates its earnings potential! Unfortunately, though, its earnings per share actually fell back over 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example, we've discovered 2 warning signs that you should run your eye over to get a better picture of Shanghai New Huang Pu Industrial Group.

Today we've zoomed in on a single data point to better understand the nature of Shanghai New Huang Pu Industrial 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.

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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.