The subdued market reaction suggests that Bestsun Energy Co., Ltd.'s (SHSE:600681) recent earnings didn't contain any surprises. However, we believe that investors should be aware of some underlying factors which may be of concern.

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Bestsun Energy's profit received a boost of CN¥39m in unusual items, over the last year. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And, after all, that's exactly what the accounting terminology implies. If Bestsun Energy doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Bestsun Energy.

Our Take On Bestsun Energy's Profit Performance

We'd posit that Bestsun Energy's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that Bestsun Energy's true underlying earnings power is actually less than its statutory profit. In further bad news, its earnings per share decreased 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 want to do dive deeper into Bestsun Energy, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 2 warning signs for Bestsun Energy (of which 1 is concerning!) you should know about.

This note has only looked at a single factor that sheds light on the nature of Bestsun Energy'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. 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.