Sichuan Dowell Science and Technology Inc.'s (SZSE:300535) strong earnings report was rewarded with a positive stock price move. We did some digging and found some further encouraging factors that investors will like.

The Impact Of Unusual Items On Profit

For anyone who wants to understand Sichuan Dowell 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¥42m 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. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. In the twelve months to March 2024, Sichuan Dowell Science and Technology had a big unusual items expense. 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 Sichuan Dowell Science and Technology.

Our Take On Sichuan Dowell Science and Technology's Profit Performance

As we discussed above, we think the significant unusual expense will make Sichuan Dowell Science and Technology's statutory profit lower than it would otherwise have been. Based on this observation, we consider it possible that Sichuan Dowell Science and Technology's statutory profit actually understates its earnings potential! And it's also positive that the company showed enough improvement to book a profit this year, after losing money last year. 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. If you want to do dive deeper into Sichuan Dowell Science and Technology, you'd also look into what risks it is currently facing. Case in point: We've spotted 3 warning signs for Sichuan Dowell Science and Technology you should be mindful of and 2 of them make us uncomfortable.

This note has only looked at a single factor that sheds light on the nature of Sichuan Dowell Science and Technology'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. 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.