Soft earnings didn't appear to concern SHENZHEN TOPRAYSOLAR Co.,Ltd.'s (SZSE:002218) shareholders over the last week. Our analysis suggests that while the profits are soft, the foundations of the business are strong.

How Do Unusual Items Influence Profit?

To properly understand SHENZHEN TOPRAYSOLARLtd's profit results, we need to consider the CN¥15m 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, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect SHENZHEN TOPRAYSOLARLtd 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 SHENZHEN TOPRAYSOLARLtd.

Our Take On SHENZHEN TOPRAYSOLARLtd's Profit Performance

Because unusual items detracted from SHENZHEN TOPRAYSOLARLtd's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that SHENZHEN TOPRAYSOLARLtd's statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in the last twelve months. 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. To that end, you should learn about the 3 warning signs we've spotted with SHENZHEN TOPRAYSOLARLtd (including 1 which can't be ignored).

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