Jiangxi Guotai Group Co.,Ltd.'s (SHSE:603977) robust earnings report didn't manage to move the market for its stock. Our analysis suggests that shareholders have noticed something concerning in the numbers.
The Impact Of Unusual Items On Profit
For anyone who wants to understand Jiangxi Guotai GroupLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥63m worth of unusual items. 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. If Jiangxi Guotai GroupLtd 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 Jiangxi Guotai GroupLtd's Profit Performance
Arguably, Jiangxi Guotai GroupLtd's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Jiangxi Guotai GroupLtd's statutory profits are better than its underlying earnings power. Nonetheless, it's still worth noting that its earnings per share have grown at 30% over the last three years. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. While conducting our analysis, we found that Jiangxi Guotai GroupLtd has 1 warning sign and it would be unwise to ignore this.
Today we've zoomed in on a single data point to better understand the nature of Jiangxi Guotai GroupLtd'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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.
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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.
