Shareholders appeared unconcerned with Sichuan Tianyi Comheart Telecom Co., Ltd.'s (SZSE:300504) lackluster earnings report last week. We did some digging, and we believe the earnings are stronger than they seem.

How Do Unusual Items Influence Profit?

To properly understand Sichuan Tianyi Comheart Telecom's profit results, we need to consider the CN¥17m expense attributed to unusual items. 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, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Sichuan Tianyi Comheart Telecom to produce a higher profit next year, all else being equal.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Sichuan Tianyi Comheart Telecom.

Our Take On Sichuan Tianyi Comheart Telecom's Profit Performance

Unusual items (expenses) detracted from Sichuan Tianyi Comheart Telecom's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Sichuan Tianyi Comheart Telecom's statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in the last 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. In terms of investment risks, we've identified 3 warning signs with Sichuan Tianyi Comheart Telecom, and understanding them should be part of your investment process.

Today we've zoomed in on a single data point to better understand the nature of Sichuan Tianyi Comheart Telecom'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. 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 that insiders are buying 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.