The subdued stock price reaction suggests that Suzhou Hycan Holdings Co., Ltd.'s (SZSE:002787) strong earnings didn't offer any surprises. Our analysis suggests that investors might be missing some promising details.

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Suzhou Hycan Holdings' profit was reduced by CN¥39m, 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 that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect Suzhou Hycan Holdings to produce a higher profit next year, all else being equal.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Suzhou Hycan Holdings.

Our Take On Suzhou Hycan Holdings' Profit Performance

Because unusual items detracted from Suzhou Hycan Holdings' earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Suzhou Hycan Holdings' 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. If you want to do dive deeper into Suzhou Hycan Holdings, you'd also look into what risks it is currently facing. Case in point: We've spotted 3 warning signs for Suzhou Hycan Holdings you should be mindful of and 1 of these is potentially serious.

This note has only looked at a single factor that sheds light on the nature of Suzhou Hycan Holdings' 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. 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.