The subdued market reaction suggests that Shanghai Lujiazui Finance & Trade Zone Development Co., Ltd.'s (SHSE:600663) recent earnings didn't contain any surprises. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

See our latest analysis for Shanghai Lujiazui Finance & Trade Zone Development

The Impact Of Unusual Items On Profit

For anyone who wants to understand Shanghai Lujiazui Finance & Trade Zone Development's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥682m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's as you'd expect, given these boosts are described as 'unusual'. 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 Shanghai Lujiazui Finance & Trade Zone Development's Profit Performance

Arguably, Shanghai Lujiazui Finance & Trade Zone Development's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Shanghai Lujiazui Finance & Trade Zone Development's statutory profits are better than its underlying earnings power. Nonetheless, it's still worth noting that its earnings per share have grown at 15% 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. So while earnings quality is important, it's equally important to consider the risks facing Shanghai Lujiazui Finance & Trade Zone Development at this point in time. For example, Shanghai Lujiazui Finance & Trade Zone Development has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

Today we've zoomed in on a single data point to better understand the nature of Shanghai Lujiazui Finance & Trade Zone Development's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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. 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.