The subdued market reaction suggests that Gansu Shangfeng Cement Co.,Ltd's (SZSE:000672) recent earnings didn't contain any surprises. We think that investors are worried about some weaknesses underlying the earnings.
Check out our latest analysis for Gansu Shangfeng CementLtd
How Do Unusual Items Influence Profit?
For anyone who wants to understand Gansu Shangfeng CementLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥115m 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. 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 that's as you'd expect, given these boosts are described as 'unusual'. If Gansu Shangfeng CementLtd doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current 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 Gansu Shangfeng CementLtd's Profit Performance
We'd posit that Gansu Shangfeng CementLtd's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that Gansu Shangfeng CementLtd's true underlying earnings power is actually less than its statutory profit. Sadly, its EPS was down over the last twelve months. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. In terms of investment risks, we've identified 2 warning signs with Gansu Shangfeng CementLtd, and understanding them should be part of your investment process.
This note has only looked at a single factor that sheds light on the nature of Gansu Shangfeng CementLtd'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. 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.