The market seemed underwhelmed by last week's earnings announcement from BII Railway Transportation Technology Holdings Company Limited (HKG:1522) despite the healthy numbers. We did some digging, and we think that investors are missing some encouraging factors in the underlying numbers.

Check out our latest analysis for BII Railway Transportation Technology Holdings

How Do Unusual Items Influence Profit?

Importantly, our data indicates that BII Railway Transportation Technology Holdings' profit was reduced by HK$46m, due to unusual items, over the last year. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. If BII Railway Transportation Technology Holdings 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 BII Railway Transportation Technology Holdings.

Our Take On BII Railway Transportation Technology Holdings' Profit Performance

Unusual items (expenses) detracted from BII Railway Transportation Technology Holdings' earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that BII Railway Transportation Technology Holdings' statutory profit actually understates its earnings potential! Better yet, its EPS are growing strongly, which is nice to see. 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 BII Railway Transportation Technology Holdings at this point in time. At Simply Wall St, we found 2 warning signs for BII Railway Transportation Technology Holdings and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of BII Railway Transportation Technology Holdings' 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.