Ningxia Qinglong Pipes Industry Group's (SZSE:002457) Shareholders Have More To Worry About Than Only Soft Earnings

A lackluster earnings announcement from Ningxia Qinglong Pipes Industry Group Co., Ltd. (SZSE:002457) last week didn't sink the stock price. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

See our latest analysis for Ningxia Qinglong Pipes Industry Group

How Do Unusual Items Influence Profit?

To properly understand Ningxia Qinglong Pipes Industry Group's profit results, we need to consider the CN¥16m 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. Which is hardly surprising, given the name. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

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

Arguably, Ningxia Qinglong Pipes Industry Group's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Ningxia Qinglong Pipes Industry Group's true underlying earnings power is actually less than its statutory profit. Sadly, its EPS was down over the last twelve months. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Every company has risks, and we've spotted 3 warning signs for Ningxia Qinglong Pipes Industry Group you should know about.

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. 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.