Despite Shanghai Zhangjiang Hi-Tech Park Development Co., Ltd.'s (SHSE:600895) recent earnings report having lackluster headline numbers, the market responded positively. While shareholders may be willing to overlook soft profit numbers, we believe that they should also be taking into account some other factors which may be cause for concern.

How Do Unusual Items Influence Profit?

For anyone who wants to understand Shanghai Zhangjiang Hi-Tech Park Development's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥796m worth of unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. 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. And, after all, that's exactly what the accounting terminology implies. Shanghai Zhangjiang Hi-Tech Park Development had a rather significant contribution from unusual items relative to its profit to September 2024. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

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 Shanghai Zhangjiang Hi-Tech Park Development's Profit Performance

As previously mentioned, Shanghai Zhangjiang Hi-Tech Park Development's large boost from unusual items won't be there indefinitely, so its statutory earnings are probably a poor guide to its underlying profitability. For this reason, we think that Shanghai Zhangjiang Hi-Tech Park Development's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. Sadly, its EPS was down over the last twelve months. 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. So while earnings quality is important, it's equally important to consider the risks facing Shanghai Zhangjiang Hi-Tech Park Development at this point in time. For instance, we've identified 2 warning signs for Shanghai Zhangjiang Hi-Tech Park Development (1 is potentially serious) you should be familiar with.

Today we've zoomed in on a single data point to better understand the nature of Shanghai Zhangjiang Hi-Tech Park Development'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.