Unsurprisingly, Inner Mongolia North Hauler Joint Stock Co., Ltd.'s (SHSE:600262) stock price was strong on the back of its healthy earnings report. However, we think that shareholders may be missing some concerning details in the numbers.

The Impact Of Unusual Items On Profit

For anyone who wants to understand Inner Mongolia North Hauler's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥17m worth of unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. 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. 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).

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Inner Mongolia North Hauler.

Our Take On Inner Mongolia North Hauler's Profit Performance

Arguably, Inner Mongolia North Hauler's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Inner Mongolia North Hauler's true underlying earnings power is actually less than its statutory profit. But on the bright side, its earnings per share have grown at an extremely impressive rate over the last three years. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. For example - Inner Mongolia North Hauler has 1 warning sign we think you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Inner Mongolia North Hauler'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.