Shareholders appeared unconcerned with Cosonic Intelligent Technologies Co., Ltd.'s (SZSE:300793) lackluster earnings report last week. We did some digging, and we believe the earnings are stronger than they seem.

The Impact Of Unusual Items On Profit

For anyone who wants to understand Cosonic Intelligent Technologies' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥51m 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, after all, that's exactly what the accounting terminology implies. If Cosonic Intelligent Technologies doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Cosonic Intelligent Technologies.

Our Take On Cosonic Intelligent Technologies' Profit Performance

Unusual items (expenses) detracted from Cosonic Intelligent Technologies' earnings over the last year, but we might see an improvement next year. Because of this, we think Cosonic Intelligent Technologies' earnings potential is at least as good as it seems, and maybe even better! And on top of that, its earnings per share have grown at 37% per year over the last three years. 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. So while earnings quality is important, it's equally important to consider the risks facing Cosonic Intelligent Technologies at this point in time. Case in point: We've spotted 3 warning signs for Cosonic Intelligent Technologies you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Cosonic Intelligent Technologies' 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. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying to be useful.

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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.