A lackluster earnings announcement from Changjiang & Jinggong Steel Building (Group) Co., Ltd (SHSE:600496) last week didn't sink the stock price. However, we believe that investors should be aware of some underlying factors which may be of concern.

How Do Unusual Items Influence Profit?

To properly understand Changjiang & Jinggong Steel Building (Group)'s profit results, we need to consider the CN¥87m gain attributed to unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. Which is hardly surprising, given the name. If Changjiang & Jinggong Steel Building (Group) 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 Changjiang & Jinggong Steel Building (Group)'s Profit Performance

We'd posit that Changjiang & Jinggong Steel Building (Group)'s statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that Changjiang & Jinggong Steel Building (Group)'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. 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. If you'd like to know more about Changjiang & Jinggong Steel Building (Group) as a business, it's important to be aware of any risks it's facing. You'd be interested to know, that we found 3 warning signs for Changjiang & Jinggong Steel Building (Group) and you'll want to know about these.

This note has only looked at a single factor that sheds light on the nature of Changjiang & Jinggong Steel Building (Group)'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 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.