Shenzhen Sunline Tech's (SZSE:300348) Strong Earnings Are Of Good Quality

When companies post strong earnings, the stock generally performs well, just like Shenzhen Sunline Tech Co., Ltd.'s (SZSE:300348) stock has recently. We have done some analysis, and we found several positive factors beyond the profit numbers.

Check out our latest analysis for Shenzhen Sunline Tech

How Do Unusual Items Influence Profit?

To properly understand Shenzhen Sunline Tech's profit results, we need to consider the CN¥8.8m expense attributed to unusual items. 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 Shenzhen Sunline Tech doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On Shenzhen Sunline Tech's Profit Performance

Because unusual items detracted from Shenzhen Sunline Tech's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Shenzhen Sunline Tech's earnings potential is at least as good as it seems, and maybe even better! And on top of that, its earnings per share increased by 37% in the last year. 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. Obviously, we love to consider the historical data to inform our opinion of a company. But it can be really valuable to consider what other analysts are forecasting. At Simply Wall St, we have analyst estimates which you can view by clicking here.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.