The stock was sluggish on the back of Tengda Construction Group Co., Ltd.'s (SHSE:600512) recent earnings report. Along with the solid headline numbers, we think that investors have some reasons for optimism.

The Impact Of Unusual Items On Profit

To properly understand Tengda Construction Group's profit results, we need to consider the CN¥18m 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. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. If Tengda Construction Group 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 Tengda Construction Group's Profit Performance

Unusual items (expenses) detracted from Tengda Construction Group's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Tengda Construction Group'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 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. If you'd like to know more about Tengda Construction Group as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 2 warning signs for Tengda Construction Group you should know about.

This note has only looked at a single factor that sheds light on the nature of Tengda Construction Group'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. 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.