The subdued stock price reaction suggests that Guangdong Senssun Weighing Apparatus Group Ltd.'s (SZSE:002870) strong earnings didn't offer any surprises. We think that investors have missed some encouraging factors underlying the profit figures.

How Do Unusual Items Influence Profit?

To properly understand Guangdong Senssun Weighing Apparatus Group's profit results, we need to consider the CN¥63m 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. Assuming those unusual expenses don't come up again, we'd therefore expect Guangdong Senssun Weighing Apparatus Group to produce a higher profit next year, all else being equal.

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 Guangdong Senssun Weighing Apparatus Group's Profit Performance

Unusual items (expenses) detracted from Guangdong Senssun Weighing Apparatus Group's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Guangdong Senssun Weighing Apparatus Group's statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at an extremely impressive rate 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. For example - Guangdong Senssun Weighing Apparatus Group has 1 warning sign we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Guangdong Senssun Weighing Apparatus Group's 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.