The stock was sluggish on the back of TianJin JinRong TianYu Precision Machinery Inc.'s (SZSE:300988) recent earnings report. Along with the solid headline numbers, we think that investors have some reasons for optimism.

How Do Unusual Items Influence Profit?

For anyone who wants to understand TianJin JinRong TianYu Precision Machinery's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥33m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. If TianJin JinRong TianYu Precision Machinery 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 TianJin JinRong TianYu Precision Machinery.

Our Take On TianJin JinRong TianYu Precision Machinery's Profit Performance

Unusual items (expenses) detracted from TianJin JinRong TianYu Precision Machinery's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that TianJin JinRong TianYu Precision Machinery's statutory profit actually understates its earnings potential! At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Case in point: We've spotted 2 warning signs for TianJin JinRong TianYu Precision Machinery you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of TianJin JinRong TianYu Precision Machinery'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. 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.