Tianjin Tianbao Infrastructure Co., Ltd.'s (SZSE:000965) stock showed strength, with investors undeterred by its weak earnings report. We think that shareholders might be missing some concerning factors that our analysis found.

The Impact Of Unusual Items On Profit

For anyone who wants to understand Tianjin Tianbao Infrastructure's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥162m worth of unusual items. 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. Which is hardly surprising, given the name. We can see that Tianjin Tianbao Infrastructure's positive unusual items were quite significant relative to its profit in the year to March 2024. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Tianjin Tianbao Infrastructure.

Our Take On Tianjin Tianbao Infrastructure's Profit Performance

As we discussed above, we think the significant positive unusual item makes Tianjin Tianbao Infrastructure's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Tianjin Tianbao Infrastructure's underlying earnings power is lower 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. If you'd like to know more about Tianjin Tianbao Infrastructure as a business, it's important to be aware of any risks it's facing. In terms of investment risks, we've identified 2 warning signs with Tianjin Tianbao Infrastructure, and understanding these bad boys should be part of your investment process.

This note has only looked at a single factor that sheds light on the nature of Tianjin Tianbao Infrastructure'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.