We Think That There Are More Issues For iSoftStone Information Technology (Group) (SZSE:301236) Than Just Sluggish Earnings

The subdued market reaction suggests that iSoftStone Information Technology (Group) Co., Ltd.'s (SZSE:301236) recent earnings didn't contain any surprises. However, we believe that investors should be aware of some underlying factors which may be of concern.

View our latest analysis for iSoftStone Information Technology (Group)

How Do Unusual Items Influence Profit?

For anyone who wants to understand iSoftStone Information Technology (Group)'s profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥97m worth of unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

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 iSoftStone Information Technology (Group)'s Profit Performance

We'd posit that iSoftStone Information Technology (Group)'s statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that iSoftStone Information Technology (Group)'s statutory profits are better than its underlying earnings power. Sadly, its EPS was down over the last twelve months. 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 iSoftStone Information Technology (Group), you'd also look into what risks it is currently facing. At Simply Wall St, we found 2 warning signs for iSoftStone Information Technology (Group) and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of iSoftStone Information Technology (Group)'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. 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.