Transfar Zhilian Co., Ltd.'s (SZSE:002010) recent weak earnings report didn't cause a big stock movement. We think that investors are worried about some weaknesses underlying the earnings.

The Impact Of Unusual Items On Profit

For anyone who wants to understand Transfar Zhilian's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥249m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's as you'd expect, given these boosts are described as 'unusual'. If Transfar Zhilian 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 Transfar Zhilian's Profit Performance

Arguably, Transfar Zhilian's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Transfar Zhilian's statutory profits are better than its underlying earnings power. In further bad news, its earnings per share decreased in 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 want to do dive deeper into Transfar Zhilian, you'd also look into what risks it is currently facing. To that end, you should learn about the 3 warning signs we've spotted with Transfar Zhilian (including 1 which shouldn't be ignored).

Today we've zoomed in on a single data point to better understand the nature of Transfar Zhilian'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.