Investors were disappointed with the weak earnings posted by HyUnion Holding Co.,Ltd (SZSE:002537 ). While the headline numbers were soft, we believe that investors might be missing some encouraging factors.

How Do Unusual Items Influence Profit?

For anyone who wants to understand HyUnion HoldingLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥124m 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, after all, that's exactly what the accounting terminology implies. If HyUnion HoldingLtd 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 HyUnion HoldingLtd.

Our Take On HyUnion HoldingLtd's Profit Performance

Because unusual items detracted from HyUnion HoldingLtd'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 HyUnion HoldingLtd's earnings potential is at least as good as it seems, and maybe even better! On the other hand, its EPS actually shrunk in 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example - HyUnion HoldingLtd has 2 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 HyUnion HoldingLtd's profit. But there are plenty of other ways to inform your opinion of a company. 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.