The market seemed underwhelmed by the solid earnings posted by Tong Petrotech Corp. (SZSE:300164) recently. We have done some analysis, and found some encouraging factors that we believe the shareholders should consider.

The Impact Of Unusual Items On Profit

To properly understand Tong Petrotech's profit results, we need to consider the CN¥9.5m expense attributed 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 that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect Tong Petrotech to produce a higher profit next year, all else being equal.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Tong Petrotech.

Our Take On Tong Petrotech's Profit Performance

Unusual items (expenses) detracted from Tong Petrotech's earnings over the last year, but we might see an improvement next year. Because of this, we think Tong Petrotech's earnings potential is at least as good as it seems, and maybe even better! 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 if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Tong Petrotech.

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