The Strong Earnings Posted By Jiangsu Jinling Sports EquipmentLtd (SZSE:300651) Are A Good Indication Of The Strength Of The Business

Jiangsu Jinling Sports Equipment Co.,Ltd. (SZSE:300651) just reported healthy earnings but the stock price didn't move much. Investors are probably missing some underlying factors which are encouraging for the future of the company.

See our latest analysis for Jiangsu Jinling Sports EquipmentLtd

How Do Unusual Items Influence Profit?

For anyone who wants to understand Jiangsu Jinling Sports EquipmentLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥7.6m due 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. If Jiangsu Jinling Sports EquipmentLtd 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 Jiangsu Jinling Sports EquipmentLtd.

Our Take On Jiangsu Jinling Sports EquipmentLtd's Profit Performance

Because unusual items detracted from Jiangsu Jinling Sports EquipmentLtd'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 Jiangsu Jinling Sports EquipmentLtd's statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at an extremely impressive rate over the last three years. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. You'd be interested to know, that we found 2 warning signs for Jiangsu Jinling Sports EquipmentLtd and you'll want to know about them.

This note has only looked at a single factor that sheds light on the nature of Jiangsu Jinling Sports EquipmentLtd'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.