Chongyi Zhangyuan Tungsten Co., Ltd. (SZSE:002378) just reported some strong earnings, and the market reacted accordingly with a healthy uplift in the share price. However, we think that shareholders may be missing some concerning details in the numbers.

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Chongyi Zhangyuan Tungsten's profit received a boost of CN¥42m 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. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. Which is hardly surprising, given the name. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On Chongyi Zhangyuan Tungsten's Profit Performance

Arguably, Chongyi Zhangyuan Tungsten's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Chongyi Zhangyuan Tungsten's statutory profits are better than its underlying earnings power. Nonetheless, it's still worth noting that its earnings per share have grown at 36% over the last three years. 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. If you want to do dive deeper into Chongyi Zhangyuan Tungsten, you'd also look into what risks it is currently facing. For example - Chongyi Zhangyuan Tungsten has 3 warning signs we think you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Chongyi Zhangyuan Tungsten's 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.