Shareholders Can Be Confident That Integrated Electronic Systems Lab's (SZSE:002339) Earnings Are High Quality

Even though Integrated Electronic Systems Lab Co., Ltd. (SZSE:002339 ) posted strong earnings, investors appeared to be underwhelmed. Our analysis says that investors should be optimistic, as the strong profit is built on solid foundations.

Check out our latest analysis for Integrated Electronic Systems Lab

The Impact Of Unusual Items On Profit

To properly understand Integrated Electronic Systems Lab's profit results, we need to consider the CN¥16m expense attributed to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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. Assuming those unusual expenses don't come up again, we'd therefore expect Integrated Electronic Systems Lab 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 Integrated Electronic Systems Lab.

Our Take On Integrated Electronic Systems Lab's Profit Performance

Because unusual items detracted from Integrated Electronic Systems Lab'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 Integrated Electronic Systems Lab'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. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. You'd be interested to know, that we found 1 warning sign for Integrated Electronic Systems Lab and you'll want to know about it.

This note has only looked at a single factor that sheds light on the nature of Integrated Electronic Systems Lab'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.