The most recent earnings report from Shenzhen Sosen Electronics Co.,Ltd. (SZSE:301002) was disappointing for shareholders. However, our analysis suggests that the soft headline numbers are getting counterbalanced by some positive underlying factors.

How Do Unusual Items Influence Profit?

For anyone who wants to understand Shenzhen Sosen ElectronicsLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥4.7m 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. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. 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 Shenzhen Sosen ElectronicsLtd 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 Shenzhen Sosen ElectronicsLtd.

Our Take On Shenzhen Sosen ElectronicsLtd's Profit Performance

Because unusual items detracted from Shenzhen Sosen ElectronicsLtd's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Shenzhen Sosen ElectronicsLtd's statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in the last twelve months. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. If you'd like to know more about Shenzhen Sosen ElectronicsLtd as a business, it's important to be aware of any risks it's facing. To help with this, we've discovered 4 warning signs (3 are a bit concerning!) that you ought to be aware of before buying any shares in Shenzhen Sosen ElectronicsLtd.

Today we've zoomed in on a single data point to better understand the nature of Shenzhen Sosen ElectronicsLtd'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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.

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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.