The market wasn't impressed with the soft earnings from RoadMainT Co.,Ltd. (SHSE:603860) recently. We did some analysis, and found that there are some reasons to be cautious about the headline numbers.

The Impact Of Unusual Items On Profit

For anyone who wants to understand RoadMainTLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥3.5m worth of unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. 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 that's as you'd expect, given these boosts are described as 'unusual'. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

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

Our Take On RoadMainTLtd's Profit Performance

Arguably, RoadMainTLtd's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that RoadMainTLtd's statutory profits are better than its underlying earnings power. Sadly, its EPS was down over the last twelve months. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. While earnings are important, another area to consider is the balance sheet. We've done some analysis and you can see our take on RoadMainTLtd's balance sheet by clicking here.

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