Longshine Technology Group Co., Ltd.'s (SZSE:300682 ) stock didn't jump after it announced some healthy earnings. We think that investors might be worried about some concerning underlying factors.

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Longshine Technology Group's profit received a boost of CN¥69m in unusual items, over the last year. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. Which is hardly surprising, given the name. If Longshine Technology Group doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

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 Longshine Technology Group's Profit Performance

We'd posit that Longshine Technology Group's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that Longshine Technology Group's true underlying earnings power is actually less than its statutory profit. The good news is that, its earnings per share increased by 14% in the last year. 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. In terms of investment risks, we've identified 1 warning sign with Longshine Technology Group, and understanding it should be part of your investment process.

Today we've zoomed in on a single data point to better understand the nature of Longshine Technology Group'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.

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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.