Ningxia Qinglong Pipes Industry Group Co., Ltd.'s (SZSE:002457) robust earnings report didn't manage to move the market for its stock. We did some digging, and we found some concerning factors in the details.

How Do Unusual Items Influence Profit?

To properly understand Ningxia Qinglong Pipes Industry Group's profit results, we need to consider the CN¥14m gain attributed to 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. 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. And, after all, that's exactly what the accounting terminology implies. If Ningxia Qinglong Pipes Industry Group doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Ningxia Qinglong Pipes Industry Group.

Our Take On Ningxia Qinglong Pipes Industry Group's Profit Performance

We'd posit that Ningxia Qinglong Pipes Industry Group's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that Ningxia Qinglong Pipes Industry Group's statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 30% EPS growth in the last year. 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. If you'd like to know more about Ningxia Qinglong Pipes Industry Group as a business, it's important to be aware of any risks it's facing. To help with this, we've discovered 2 warning signs (1 doesn't sit too well with us!) that you ought to be aware of before buying any shares in Ningxia Qinglong Pipes Industry Group.

Today we've zoomed in on a single data point to better understand the nature of Ningxia Qinglong Pipes Industry Group's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.