The recent earnings posted by Qian Jiang Water Resources Development Co.,Ltd (SHSE:600283) were solid, but the stock didn't move as much as we expected. We think this is due to investors looking beyond the statutory profits and being concerned with what they see.

The Impact Of Unusual Items On Profit

For anyone who wants to understand Qian Jiang Water Resources DevelopmentLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥60m worth of unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. Which is hardly surprising, given the name. 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 Qian Jiang Water Resources DevelopmentLtd.

Our Take On Qian Jiang Water Resources DevelopmentLtd's Profit Performance

Arguably, Qian Jiang Water Resources DevelopmentLtd's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Qian Jiang Water Resources DevelopmentLtd's true underlying earnings power is actually less than its statutory profit. In further bad news, its earnings per share decreased in the last year. 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 want to do dive deeper into Qian Jiang Water Resources DevelopmentLtd, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 2 warning signs for Qian Jiang Water Resources DevelopmentLtd (of which 1 makes us a bit uncomfortable!) you should know about.

This note has only looked at a single factor that sheds light on the nature of Qian Jiang Water Resources DevelopmentLtd'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 with significant insider holdings 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.