Shareholders appeared unconcerned with Guangdong Liantai Environmental Protection Co.,Ltd.'s (SHSE:603797) lackluster earnings report last week. We think that the softer headline numbers might be getting counterbalanced by some positive underlying factors.

How Do Unusual Items Influence Profit?

For anyone who wants to understand Guangdong Liantai Environmental ProtectionLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥79m due to unusual items. 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, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Guangdong Liantai Environmental ProtectionLtd to produce a higher profit next year, all else being equal.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Guangdong Liantai Environmental ProtectionLtd.

Our Take On Guangdong Liantai Environmental ProtectionLtd's Profit Performance

Unusual items (expenses) detracted from Guangdong Liantai Environmental ProtectionLtd's earnings over the last year, but we might see an improvement next year. Because of this, we think Guangdong Liantai Environmental ProtectionLtd's earnings potential is at least as good as it seems, and maybe even better! Unfortunately, though, its earnings per share actually fell back over 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. So while earnings quality is important, it's equally important to consider the risks facing Guangdong Liantai Environmental ProtectionLtd at this point in time. To that end, you should learn about the 2 warning signs we've spotted with Guangdong Liantai Environmental ProtectionLtd (including 1 which can't be ignored).

Today we've zoomed in on a single data point to better understand the nature of Guangdong Liantai Environmental ProtectionLtd'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.