The stock was sluggish on the back of ShenZhen GAD Environmental Technology Co., Ltd.'s (SZSE:300854) recent earnings report. We have done some analysis, and found some encouraging factors that we believe the shareholders should consider.

How Do Unusual Items Influence Profit?

To properly understand ShenZhen GAD Environmental Technology's profit results, we need to consider the CN¥12m expense attributed 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 ShenZhen GAD Environmental Technology 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 ShenZhen GAD Environmental Technology.

Our Take On ShenZhen GAD Environmental Technology's Profit Performance

Unusual items (expenses) detracted from ShenZhen GAD Environmental Technology's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that ShenZhen GAD Environmental Technology's statutory profit actually understates its earnings potential! And on top of that, its earnings per share increased by 5.2% 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. If you want to do dive deeper into ShenZhen GAD Environmental Technology, you'd also look into what risks it is currently facing. For instance, we've identified 3 warning signs for ShenZhen GAD Environmental Technology (1 shouldn't be ignored) you should be familiar with.

Today we've zoomed in on a single data point to better understand the nature of ShenZhen GAD Environmental Technology'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. 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.