The subdued market reaction suggests that Suzhou Dongshan Precision Manufacturing Co., Ltd.'s (SZSE:002384) recent earnings didn't contain any surprises. However, we believe that investors should be aware of some underlying factors which may be of concern.

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Suzhou Dongshan Precision Manufacturing's profit received a boost of CN¥192m 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. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And, after all, that's exactly what the accounting terminology implies. If Suzhou Dongshan Precision Manufacturing 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 Suzhou Dongshan Precision Manufacturing's Profit Performance

We'd posit that Suzhou Dongshan Precision Manufacturing's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that Suzhou Dongshan Precision Manufacturing's true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 24% per annum growth in EPS for the last three. 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 if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. While conducting our analysis, we found that Suzhou Dongshan Precision Manufacturing has 1 warning sign and it would be unwise to ignore this.

Today we've zoomed in on a single data point to better understand the nature of Suzhou Dongshan Precision Manufacturing'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. 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.