Super-Dragon Engineering Plastics Co., Ltd's (SZSE:301131) earnings announcement last week didn't impress shareholders. Despite the soft profit numbers, our analysis has optimistic about the overall quality of the income statement.

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Super-Dragon Engineering Plastics' profit was reduced by CN¥8.2m, due to unusual items, over the last year. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. If Super-Dragon Engineering Plastics 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 Super-Dragon Engineering Plastics.

Our Take On Super-Dragon Engineering Plastics' Profit Performance

Because unusual items detracted from Super-Dragon Engineering Plastics' earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Super-Dragon Engineering Plastics' earnings potential is at least as good as it seems, and maybe even better! On the other hand, its EPS actually shrunk in the last twelve months. 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 Super-Dragon Engineering Plastics, you'd also look into what risks it is currently facing. When we did our research, we found 5 warning signs for Super-Dragon Engineering Plastics (2 are potentially serious!) that we believe deserve your full attention.

Today we've zoomed in on a single data point to better understand the nature of Super-Dragon Engineering Plastics' profit. But there are plenty of other ways to inform your opinion of a company. 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. 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.