Shanghai Dazhong Public Utilities(Group) Co.,Ltd.'s (SHSE:600635) solid earnings announcement recently didn't do much to the stock price. We did some analysis to find out why and believe that investors might be missing some encouraging factors contained in the earnings.

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Shanghai Dazhong Public Utilities(Group)Ltd's profit was reduced by CN¥138m, due to unusual items, over the last year. 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 that's hardly a surprise given these line items are considered unusual. If Shanghai Dazhong Public Utilities(Group)Ltd 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 Shanghai Dazhong Public Utilities(Group)Ltd.

Our Take On Shanghai Dazhong Public Utilities(Group)Ltd's Profit Performance

Because unusual items detracted from Shanghai Dazhong Public Utilities(Group)Ltd'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 Shanghai Dazhong Public Utilities(Group)Ltd's earnings potential is at least as good as it seems, and maybe even better! And on top of that, its earnings per share increased by 23% in the last year. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. If you'd like to know more about Shanghai Dazhong Public Utilities(Group)Ltd as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 5 warning signs for Shanghai Dazhong Public Utilities(Group)Ltd (of which 3 are a bit unpleasant!) you should know about.

Today we've zoomed in on a single data point to better understand the nature of Shanghai Dazhong Public Utilities(Group)Ltd'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.