When companies post strong earnings, the stock generally performs well, just like Shiyue Daotian Group Co., Ltd.'s (HKG:9676) stock has recently. Our analysis found some more factors that we think are good for shareholders.

How Do Unusual Items Influence Profit?

For anyone who wants to understand Shiyue Daotian Group's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥22m 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 Shiyue Daotian Group 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 Shiyue Daotian Group.

Our Take On Shiyue Daotian Group's Profit Performance

Because unusual items detracted from Shiyue Daotian Group's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Shiyue Daotian Group's earnings potential is at least as good as it seems, and maybe even better! And one can definitely find a positive in the fact that it made a profit this year, despite losing money 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. While it's very important to consider the profit and loss statement, you can also learn a lot about a company by looking at its balance sheet. If you're interested we have a graphic representation of Shiyue Daotian Group's balance sheet.

This note has only looked at a single factor that sheds light on the nature of Shiyue Daotian Group's 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. 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.