A lackluster earnings announcement from Fujian Nanwang Environment Protection Scien-Tech Co.,Ltd (SZSE:301355) last week didn't sink the stock price. However, we believe that investors should be aware of some underlying factors which may be of concern.

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Fujian Nanwang Environment Protection Scien-TechLtd's profit received a boost of CN¥10m in unusual items, over the last year. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And that's as you'd expect, given these boosts are described as 'unusual'. If Fujian Nanwang Environment Protection Scien-TechLtd doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Fujian Nanwang Environment Protection Scien-TechLtd.

Our Take On Fujian Nanwang Environment Protection Scien-TechLtd's Profit Performance

We'd posit that Fujian Nanwang Environment Protection Scien-TechLtd's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that Fujian Nanwang Environment Protection Scien-TechLtd's true underlying earnings power is actually less than its statutory profit. And we are pleased to note that EPS is at least heading in the right direction in the alst twelve months. 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 want to do dive deeper into Fujian Nanwang Environment Protection Scien-TechLtd, you'd also look into what risks it is currently facing. Case in point: We've spotted 1 warning sign for Fujian Nanwang Environment Protection Scien-TechLtd you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Fujian Nanwang Environment Protection Scien-TechLtd's profit. But there are plenty of other ways to inform your opinion of a company. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.