When companies post strong earnings, the stock generally performs well, just like Lihe Technology (Hunan) Co., Ltd.'s (SZSE:300800) stock has recently. We have done some analysis, and we found several positive factors beyond the profit numbers.

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Lihe Technology (Hunan)'s profit was reduced by CN¥600k, 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 Lihe Technology (Hunan) 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 Lihe Technology (Hunan).

Our Take On Lihe Technology (Hunan)'s Profit Performance

Because unusual items detracted from Lihe Technology (Hunan)'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 Lihe Technology (Hunan)'s earnings potential is at least as good as it seems, and maybe even better! And on top of that, its earnings per share increased by 40% in the last year. 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'd like to know more about Lihe Technology (Hunan) as a business, it's important to be aware of any risks it's facing. In terms of investment risks, we've identified 2 warning signs with Lihe Technology (Hunan), and understanding these bad boys should be part of your investment process.

This note has only looked at a single factor that sheds light on the nature of Lihe Technology (Hunan)'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. 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.