Nanjing Inform Storage Equipment (Group)'s (SHSE:603066) Soft Earnings Are Actually Better Than They Appear

Shareholders appeared unconcerned with Nanjing Inform Storage Equipment (Group) Co., Ltd.'s (SHSE:603066) lackluster earnings report last week. We did some digging, and we believe the earnings are stronger than they seem.

Check out our latest analysis for Nanjing Inform Storage Equipment (Group)

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Nanjing Inform Storage Equipment (Group)'s profit was reduced by CN¥23m, due to unusual items, over the last year. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. 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. If Nanjing Inform Storage Equipment (Group) 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 Nanjing Inform Storage Equipment (Group).

Our Take On Nanjing Inform Storage Equipment (Group)'s Profit Performance

Unusual items (expenses) detracted from Nanjing Inform Storage Equipment (Group)'s earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Nanjing Inform Storage Equipment (Group)'s statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at 36% per year over the last three years. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Every company has risks, and we've spotted 1 warning sign for Nanjing Inform Storage Equipment (Group) you should know about.

Today we've zoomed in on a single data point to better understand the nature of Nanjing Inform Storage Equipment (Group)'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.