Sapphire Corporation Limited (SGX:BRD) recently posted some strong earnings, and the market responded positively. We did some digging and found some further encouraging factors that investors will like.

Check out our latest analysis for Sapphire

The Impact Of Unusual Items On Profit

To properly understand Sapphire's profit results, we need to consider the CN¥4.7m 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. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. If Sapphire 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 Sapphire.

Our Take On Sapphire's Profit Performance

Unusual items (expenses) detracted from Sapphire's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Sapphire's statutory profit actually understates its earnings potential! Furthermore, it has done a great job growing EPS over the last year. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. To that end, you should learn about the 3 warning signs we've spotted with Sapphire (including 2 which make us uncomfortable).

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