The market was pleased with the recent earnings report from Shanghai Fortune Techgroup Co., Ltd. (SZSE:300493), despite the profit numbers being soft. Our analysis suggests that investors may have noticed some promising signs beyond the statutory profit figures.

How Do Unusual Items Influence Profit?

For anyone who wants to understand Shanghai Fortune Techgroup's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥8.4m due to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. If Shanghai Fortune Techgroup doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Shanghai Fortune Techgroup.

Our Take On Shanghai Fortune Techgroup's Profit Performance

Unusual items (expenses) detracted from Shanghai Fortune Techgroup's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Shanghai Fortune Techgroup's statutory profit actually understates its earnings potential! Unfortunately, though, its earnings per share actually fell back over 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Case in point: We've spotted 1 warning sign for Shanghai Fortune Techgroup you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Shanghai Fortune Techgroup's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.