Shareholders appeared unconcerned with Lanzhou Lishang Guochao Industrial Group Co.,Ltd's (SHSE:600738) lackluster earnings report last week. We think that the softer headline numbers might be getting counterbalanced by some positive underlying factors.

How Do Unusual Items Influence Profit?

To properly understand Lanzhou Lishang Guochao Industrial GroupLtd's profit results, we need to consider the CN¥74m expense attributed to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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. Assuming those unusual expenses don't come up again, we'd therefore expect Lanzhou Lishang Guochao Industrial GroupLtd to produce a higher profit next year, all else being equal.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Lanzhou Lishang Guochao Industrial GroupLtd.

Our Take On Lanzhou Lishang Guochao Industrial GroupLtd's Profit Performance

Unusual items (expenses) detracted from Lanzhou Lishang Guochao Industrial GroupLtd's earnings over the last year, but we might see an improvement next year. Because of this, we think Lanzhou Lishang Guochao Industrial GroupLtd's earnings potential is at least as good as it seems, and maybe even better! 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'd like to know more about Lanzhou Lishang Guochao Industrial GroupLtd as a business, it's important to be aware of any risks it's facing. For example, Lanzhou Lishang Guochao Industrial GroupLtd has 2 warning signs (and 1 which is significant) we think you should know about.

This note has only looked at a single factor that sheds light on the nature of Lanzhou Lishang Guochao Industrial GroupLtd'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.

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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.