Shandong Zhonglu Oceanic Fisheries Company Limited (SZSE:200992) just reported healthy earnings but the stock price didn't move much. We think that investors have missed some encouraging factors underlying the profit figures.

How Do Unusual Items Influence Profit?

To properly understand Shandong Zhonglu Oceanic Fisheries' profit results, we need to consider the CN¥68m expense attributed 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. In the twelve months to March 2024, Shandong Zhonglu Oceanic Fisheries had a big unusual items expense. As a result, we can surmise that the unusual items made its statutory profit significantly weaker than it would otherwise be.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Shandong Zhonglu Oceanic Fisheries.

Our Take On Shandong Zhonglu Oceanic Fisheries' Profit Performance

As we discussed above, we think the significant unusual expense will make Shandong Zhonglu Oceanic Fisheries' statutory profit lower than it would otherwise have been. Based on this observation, we consider it possible that Shandong Zhonglu Oceanic Fisheries' statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at an extremely impressive rate over the last three years. 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. So while earnings quality is important, it's equally important to consider the risks facing Shandong Zhonglu Oceanic Fisheries at this point in time. To help with this, we've discovered 3 warning signs (1 is a bit unpleasant!) that you ought to be aware of before buying any shares in Shandong Zhonglu Oceanic Fisheries.

Today we've zoomed in on a single data point to better understand the nature of Shandong Zhonglu Oceanic Fisheries' 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.