There May Be Underlying Issues With The Quality Of Shanghai Research Institute of Building Sciences Group's (SHSE:603153) Earnings

Shanghai Research Institute of Building Sciences Group Co., Ltd.'s (SHSE:603153) robust earnings report didn't manage to move the market for its stock. Our analysis suggests that this might be because shareholders have noticed some concerning underlying factors.

View our latest analysis for Shanghai Research Institute of Building Sciences Group

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Shanghai Research Institute of Building Sciences Group's profit received a boost of CN¥41m in unusual items, over the last year. 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 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 that's as you'd expect, given these boosts are described as 'unusual'. If Shanghai Research Institute of Building Sciences 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 Shanghai Research Institute of Building Sciences Group.

Our Take On Shanghai Research Institute of Building Sciences Group's Profit Performance

Arguably, Shanghai Research Institute of Building Sciences Group's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Shanghai Research Institute of Building Sciences Group's true underlying earnings power is actually less than its statutory profit. Nonetheless, it's still worth noting that its earnings per share have grown at 6.7% over the last three years. 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 Shanghai Research Institute of Building Sciences 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 1 warning sign for Shanghai Research Institute of Building Sciences Group and you'll want to know about this.

This note has only looked at a single factor that sheds light on the nature of Shanghai Research Institute of Building Sciences Group's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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 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.