Despite posting healthy earnings, UniTTEC Co.,Ltd's (SZSE:000925 ) stock has been quite weak. Along with the solid headline numbers, we think that investors have some reasons for optimism.

How Do Unusual Items Influence Profit?

Importantly, our data indicates that UniTTECLtd's profit was reduced by CN¥36m, due to unusual items, over the last year. 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. If UniTTECLtd doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

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

Our Take On UniTTECLtd's Profit Performance

Unusual items (expenses) detracted from UniTTECLtd's earnings over the last year, but we might see an improvement next year. Because of this, we think UniTTECLtd's earnings potential is at least as good as it seems, and maybe even better! And on top of that, its earnings per share have grown at an extremely impressive 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. If you want to do dive deeper into UniTTECLtd, you'd also look into what risks it is currently facing. To that end, you should learn about the 3 warning signs we've spotted with UniTTECLtd (including 2 which are a bit unpleasant).

This note has only looked at a single factor that sheds light on the nature of UniTTECLtd'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. 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.