Soft earnings didn't appear to concern China Tianbao Group Development Company Limited's (HKG:1427) shareholders over the last week. We did some digging, and we believe the earnings are stronger than they seem.

View our latest analysis for China Tianbao Group Development

The Impact Of Unusual Items On Profit

To properly understand China Tianbao Group Development's profit results, we need to consider the CN¥37m expense attributed to unusual items. 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 China Tianbao Group Development 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 China Tianbao Group Development.

Our Take On China Tianbao Group Development's Profit Performance

Because unusual items detracted from China Tianbao Group Development's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that China Tianbao Group Development's statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in the last twelve months. 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. So while earnings quality is important, it's equally important to consider the risks facing China Tianbao Group Development at this point in time. Case in point: We've spotted 2 warning signs for China Tianbao Group Development you should be aware of.

This note has only looked at a single factor that sheds light on the nature of China Tianbao Group Development'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.