Despite posting some strong earnings, the market for Shanghai Industrial Holdings Limited's (HKG:363) stock hasn't moved much. Our analysis suggests that shareholders have noticed something concerning in the numbers.

See our latest analysis for Shanghai Industrial Holdings

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Shanghai Industrial Holdings' profit received a boost of HK$1.1b 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. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And, after all, that's exactly what the accounting terminology implies. If Shanghai Industrial Holdings 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 Shanghai Industrial Holdings' Profit Performance

Arguably, Shanghai Industrial Holdings' statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Shanghai Industrial Holdings' statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 12% per annum growth in EPS for the last three. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example - Shanghai Industrial Holdings has 1 warning sign we think you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Shanghai Industrial Holdings' 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.