The recent earnings posted by COSCO SHIPPING Ports Limited (HKG:1199) were solid, but the stock didn't move as much as we expected. However the statutory profit number doesn't tell the whole story, and we have found some factors which might be of concern to shareholders.

See our latest analysis for COSCO SHIPPING Ports

How Do Unusual Items Influence Profit?

Importantly, our data indicates that COSCO SHIPPING Ports' profit received a boost of US$44m in unusual items, over the last year. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. 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 COSCO SHIPPING Ports' Profit Performance

We'd posit that COSCO SHIPPING Ports' 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 COSCO SHIPPING Ports' statutory profits are better than its underlying earnings power. Sadly, its EPS was down over the last twelve months. 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. So while earnings quality is important, it's equally important to consider the risks facing COSCO SHIPPING Ports at this point in time. In terms of investment risks, we've identified 2 warning signs with COSCO SHIPPING Ports, and understanding these should be part of your investment process.

This note has only looked at a single factor that sheds light on the nature of COSCO SHIPPING Ports' 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. 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.