The recent earnings posted by Zhejiang Rongsheng Environmental Protection Paper Co., Ltd. (SHSE:603165) were solid, but the stock didn't move as much as we expected. We think this is due to investors looking beyond the statutory profits and being concerned with what they see.

How Do Unusual Items Influence Profit?

For anyone who wants to understand Zhejiang Rongsheng Environmental Protection Paper's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥25m worth of unusual items. 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. Which is hardly surprising, given the name. If Zhejiang Rongsheng Environmental Protection Paper doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On Zhejiang Rongsheng Environmental Protection Paper's Profit Performance

We'd posit that Zhejiang Rongsheng Environmental Protection Paper's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that Zhejiang Rongsheng Environmental Protection Paper's true underlying earnings power is actually less than its statutory profit. The good news is that, its earnings per share increased by 33% 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 Zhejiang Rongsheng Environmental Protection Paper as a business, it's important to be aware of any risks it's facing. In terms of investment risks, we've identified 1 warning sign with Zhejiang Rongsheng Environmental Protection Paper, and understanding this should be part of your investment process.

Today we've zoomed in on a single data point to better understand the nature of Zhejiang Rongsheng Environmental Protection Paper's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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. 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.