Investors were disappointed with the weak earnings posted by Jiangsu Feymer Technology Co., Ltd. (SHSE:688350 ). Despite the soft profit numbers, our analysis has optimistic about the overall quality of the income statement.

How Do Unusual Items Influence Profit?

For anyone who wants to understand Jiangsu Feymer Technology's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥19m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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. Jiangsu Feymer Technology took a rather significant hit from unusual items in the year to December 2023. All else being equal, this would likely have the effect of making the statutory profit look worse than its underlying earnings power.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Jiangsu Feymer Technology.

Our Take On Jiangsu Feymer Technology's Profit Performance

As we mentioned previously, the Jiangsu Feymer Technology's profit was hampered by unusual items in the last year. Based on this observation, we consider it possible that Jiangsu Feymer Technology's statutory profit actually understates its earnings potential! Unfortunately, though, its earnings per share actually fell back over the last year. 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. Our analysis shows 5 warning signs for Jiangsu Feymer Technology (1 is a bit unpleasant!) and we strongly recommend you look at them before investing.

Today we've zoomed in on a single data point to better understand the nature of Jiangsu Feymer 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.