Jiangsu Tongguang Electronic Wire & Cable Co., Ltd.'s (SZSE:300265) stock showed strength after its weak earnings report. Sometimes, shareholders are willing to ignore soft numbers with the hope that they will improve, but our analysis suggests this is unlikely for Jiangsu Tongguang Electronic Wire & Cable.

View our latest analysis for Jiangsu Tongguang Electronic Wire & Cable

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Jiangsu Tongguang Electronic Wire & Cable's profit received a boost of CN¥15m in unusual items, over the last year. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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. 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 Jiangsu Tongguang Electronic Wire & Cable.

Our Take On Jiangsu Tongguang Electronic Wire & Cable's Profit Performance

We'd posit that Jiangsu Tongguang Electronic Wire & Cable's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that Jiangsu Tongguang Electronic Wire & Cable's statutory profits are better than its underlying earnings power. Nonetheless, it's still worth noting that its earnings per share have grown at 21% over the last three years. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Be aware that Jiangsu Tongguang Electronic Wire & Cable is showing 4 warning signs in our investment analysis and 1 of those is concerning...

Today we've zoomed in on a single data point to better understand the nature of Jiangsu Tongguang Electronic Wire & Cable's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.