A lackluster earnings announcement from Guangdong JingYi Metal CO.,Ltd (SZSE:002295) last week didn't sink the stock price. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Guangdong JingYi MetalLtd's profit received a boost of CN¥4.2m in unusual items, over the last year. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. 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. 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 Guangdong JingYi MetalLtd.

Our Take On Guangdong JingYi MetalLtd's Profit Performance

Arguably, Guangdong JingYi MetalLtd's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Guangdong JingYi MetalLtd's true underlying earnings power is actually less than its statutory profit. Sadly, its EPS was down over the last twelve months. 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 want to do dive deeper into Guangdong JingYi MetalLtd, you'd also look into what risks it is currently facing. Our analysis shows 4 warning signs for Guangdong JingYi MetalLtd (1 can't be ignored!) and we strongly recommend you look at them before investing.

This note has only looked at a single factor that sheds light on the nature of Guangdong JingYi MetalLtd'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.