Investors were disappointed by Shenzhen Riland Industry Group Co., Ltd's (SZSE:300154 ) latest earnings release. We did some analysis, and found that there are some reasons to be cautious about the headline numbers.

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Shenzhen Riland Industry Group's profit received a boost of CN¥9.9m in unusual items, over the last year. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. 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 Shenzhen Riland Industry Group.

Our Take On Shenzhen Riland Industry Group's Profit Performance

Arguably, Shenzhen Riland Industry Group's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Shenzhen Riland Industry Group's true underlying earnings power is actually less than its statutory profit. Sadly, its EPS was down over 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. If you'd like to know more about Shenzhen Riland Industry Group as a business, it's important to be aware of any risks it's facing. For example - Shenzhen Riland Industry Group has 2 warning signs we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Shenzhen Riland Industry Group'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 with high insider ownership.

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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.