The stock price didn't jump after Chongqing Changjiang River Moulding Material (Group) Co., Ltd. (SZSE:001296) posted decent earnings last week. We think that investors might be worried about some concerning underlying factors.

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Chongqing Changjiang River Moulding Material (Group)'s profit received a boost of CN¥14m in unusual items, over the last year. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. If Chongqing Changjiang River Moulding Material (Group) 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 Chongqing Changjiang River Moulding Material (Group).

Our Take On Chongqing Changjiang River Moulding Material (Group)'s Profit Performance

Arguably, Chongqing Changjiang River Moulding Material (Group)'s statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Chongqing Changjiang River Moulding Material (Group)'s statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 18% EPS growth in the last year. 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. You'd be interested to know, that we found 1 warning sign for Chongqing Changjiang River Moulding Material (Group) and you'll want to know about this.

Today we've zoomed in on a single data point to better understand the nature of Chongqing Changjiang River Moulding Material (Group)'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.