East China Engineering Science and Technology Co., Ltd. (SZSE:002140) announced a healthy earnings result recently, and the market rewarded it with a strong uplift in the stock price. Looking deeper at the numbers, we found several encouraging factors beyond the headline profit numbers.

How Do Unusual Items Influence Profit?

For anyone who wants to understand East China Engineering Science and Technology's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥53m due to unusual items. 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. Assuming those unusual expenses don't come up again, we'd therefore expect East China Engineering Science and Technology 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 East China Engineering Science and Technology's Profit Performance

Unusual items (expenses) detracted from East China Engineering Science and Technology's earnings over the last year, but we might see an improvement next year. Because of this, we think East China Engineering Science and Technology's earnings potential is at least as good as it seems, and maybe even better! And on top of that, its earnings per share have grown at 32% per year over the last three years. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. So while earnings quality is important, it's equally important to consider the risks facing East China Engineering Science and Technology at this point in time. In terms of investment risks, we've identified 1 warning sign with East China Engineering Science and Technology, and understanding this should be part of your investment process.

Today we've zoomed in on a single data point to better understand the nature of East China Engineering Science and Technology's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying to be useful.

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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.