The market was pleased with the recent earnings report from Jiangsu Longda Superalloy Co., Ltd. (SHSE:688231), despite the profit numbers being soft. Our analysis suggests that investors may have noticed some promising signs beyond the statutory profit figures.

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Jiangsu Longda Superalloy's profit was reduced by CN¥24m, due to unusual items, over the last year. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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. Jiangsu Longda Superalloy took a rather significant hit from unusual items in the year to March 2024. All else being equal, this would likely have the effect of making the statutory profit look worse than its underlying earnings power.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Jiangsu Longda Superalloy.

Our Take On Jiangsu Longda Superalloy's Profit Performance

As we discussed above, we think the significant unusual expense will make Jiangsu Longda Superalloy's statutory profit lower than it would otherwise have been. Because of this, we think Jiangsu Longda Superalloy's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! Unfortunately, though, its earnings per share actually fell back over the 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. So while earnings quality is important, it's equally important to consider the risks facing Jiangsu Longda Superalloy at this point in time. At Simply Wall St, we found 3 warning signs for Jiangsu Longda Superalloy and we think they deserve your attention.

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