Despite posting healthy earnings, Xinjiang Qingsong Building Materials and Chemicals(Group)Co,Ltd.'s (SHSE:600425 ) stock has been quite weak. Our analysis suggests that there are some reasons for hope that investors should be aware of.
The Impact Of Unusual Items On Profit
For anyone who wants to understand Xinjiang Qingsong Building Materials and Chemicals(Group)CoLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥101m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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. If Xinjiang Qingsong Building Materials and Chemicals(Group)CoLtd 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 Xinjiang Qingsong Building Materials and Chemicals(Group)CoLtd's Profit Performance
Because unusual items detracted from Xinjiang Qingsong Building Materials and Chemicals(Group)CoLtd's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Xinjiang Qingsong Building Materials and Chemicals(Group)CoLtd's statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at 61% per year over the last three years. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Every company has risks, and we've spotted 1 warning sign for Xinjiang Qingsong Building Materials and Chemicals(Group)CoLtd you should know about.
This note has only looked at a single factor that sheds light on the nature of Xinjiang Qingsong Building Materials and Chemicals(Group)CoLtd'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.