The market shrugged off Create Technology & Science Co.,Ltd.'s (SZSE:000551) solid earnings report. We did some digging and believe investors may be worried about some underlying factors in the report.

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Create Technology & ScienceLtd's profit received a boost of CN¥30m 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. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And, after all, that's exactly what the accounting terminology implies. 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 Create Technology & ScienceLtd.

Our Take On Create Technology & ScienceLtd's Profit Performance

We'd posit that Create Technology & ScienceLtd's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that Create Technology & ScienceLtd's true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 66% per annum growth in EPS for the last three. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. If you want to do dive deeper into Create Technology & ScienceLtd, you'd also look into what risks it is currently facing. Case in point: We've spotted 1 warning sign for Create Technology & ScienceLtd you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Create Technology & ScienceLtd'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 with significant insider holdings 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.