Winning Health Technology Group Co., Ltd. (SZSE:300253) announced strong profits, but the stock was stagnant. We did some digging, and we found some concerning factors in the details.

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Winning Health Technology Group's profit received a boost of CN¥95m in unusual items, over the last year. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. Which is hardly surprising, given the name. We can see that Winning Health Technology Group's positive unusual items were quite significant relative to its profit in the year to December 2023. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

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 Winning Health Technology Group's Profit Performance

As we discussed above, we think the significant positive unusual item makes Winning Health Technology Group's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Winning Health Technology Group's underlying earnings power is lower than its statutory profit. But the happy news is that, while acknowledging we have to look beyond the statutory numbers, those numbers are still improving, with EPS growing at a very high rate over the last year. 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 Winning Health Technology Group at this point in time. Every company has risks, and we've spotted 1 warning sign for Winning Health Technology Group you should know about.

Today we've zoomed in on a single data point to better understand the nature of Winning Health Technology Group's 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.