Despite Zhejiang Goldensea Hi-Tech Co., Ltd's (SHSE:603311) recent earnings report having lackluster headline numbers, the market responded positively. We think that shareholders might be missing some concerning factors that our analysis found.

See our latest analysis for Zhejiang Goldensea Hi-Tech

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Zhejiang Goldensea Hi-Tech's profit received a boost of CN¥8.5m in unusual items, over the last year. 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. And that's as you'd expect, given these boosts are described as 'unusual'. 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 Zhejiang Goldensea Hi-Tech.

Our Take On Zhejiang Goldensea Hi-Tech's Profit Performance

Arguably, Zhejiang Goldensea Hi-Tech's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Zhejiang Goldensea Hi-Tech's true underlying earnings power is actually less than its statutory profit. In further bad news, its earnings per share decreased 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. In terms of investment risks, we've identified 3 warning signs with Zhejiang Goldensea Hi-Tech, and understanding them should be part of your investment process.

This note has only looked at a single factor that sheds light on the nature of Zhejiang Goldensea Hi-Tech's profit. But there are plenty of other ways to inform your opinion of a company. 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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.

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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.