The market for Zhejiang Natural Outdoor Goods Inc.'s (SHSE:605080) shares didn't move much after it posted weak earnings recently. We think that the softer headline numbers might be getting counterbalanced by some positive underlying factors.

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Zhejiang Natural Outdoor Goods' profit was reduced by CN¥44m, due to unusual items, over the last year. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. If Zhejiang Natural Outdoor Goods doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming 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 Zhejiang Natural Outdoor Goods' Profit Performance

Because unusual items detracted from Zhejiang Natural Outdoor Goods' earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Zhejiang Natural Outdoor Goods' earnings potential is at least as good as it seems, and maybe even better! On the other hand, its EPS actually shrunk in the last twelve months. 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. If you want to do dive deeper into Zhejiang Natural Outdoor Goods, you'd also look into what risks it is currently facing. For example - Zhejiang Natural Outdoor Goods has 2 warning signs we think you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Zhejiang Natural Outdoor Goods' profit. But there are plenty of other ways to inform your opinion of a company. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. 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.