Even though JiangSu Zhenjiang New Energy Equipment Co., Ltd.'s (SHSE:603507) recent earnings release was robust, the market didn't seem to notice. Investors are probably missing some underlying factors which are encouraging for the future of the company.

How Do Unusual Items Influence Profit?

Importantly, our data indicates that JiangSu Zhenjiang New Energy Equipment's profit was reduced by CN¥57m, due to unusual items, over the last year. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. 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. Assuming those unusual expenses don't come up again, we'd therefore expect JiangSu Zhenjiang New Energy Equipment to produce a higher profit next year, all else being equal.

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 JiangSu Zhenjiang New Energy Equipment's Profit Performance

Unusual items (expenses) detracted from JiangSu Zhenjiang New Energy Equipment's earnings over the last year, but we might see an improvement next year. Because of this, we think JiangSu Zhenjiang New Energy Equipment's earnings potential is at least as good as it seems, and maybe even better! And the EPS is up 40% annually, over the last three years. 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. So while earnings quality is important, it's equally important to consider the risks facing JiangSu Zhenjiang New Energy Equipment at this point in time. To help with this, we've discovered 2 warning signs (1 can't be ignored!) that you ought to be aware of before buying any shares in JiangSu Zhenjiang New Energy Equipment.

This note has only looked at a single factor that sheds light on the nature of JiangSu Zhenjiang New Energy Equipment's profit. But there are plenty of other ways to inform your opinion of a company. 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.