The market for Shanghai Ace Investment&Development Co.,Ltd's (SHSE:603329) shares didn't move much after it posted weak earnings recently. Our analysis suggests that while the profits are soft, the foundations of the business are strong.

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Shanghai Ace Investment&DevelopmentLtd's profit was reduced by CN¥29m, 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, after all, that's exactly what the accounting terminology implies. Shanghai Ace Investment&DevelopmentLtd took a rather significant hit from unusual items in the year to March 2024. All else being equal, this would likely have the effect of making the statutory profit look worse than its underlying earnings power.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Shanghai Ace Investment&DevelopmentLtd.

Our Take On Shanghai Ace Investment&DevelopmentLtd's Profit Performance

As we discussed above, we think the significant unusual expense will make Shanghai Ace Investment&DevelopmentLtd's statutory profit lower than it would otherwise have been. Because of this, we think Shanghai Ace Investment&DevelopmentLtd's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! 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. If you'd like to know more about Shanghai Ace Investment&DevelopmentLtd as a business, it's important to be aware of any risks it's facing. Our analysis shows 3 warning signs for Shanghai Ace Investment&DevelopmentLtd (1 doesn't sit too well with us!) and we strongly recommend you look at these bad boys before investing.

This note has only looked at a single factor that sheds light on the nature of Shanghai Ace Investment&DevelopmentLtd'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. 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.