Some Investors May Be Willing To Look Past Xinjiang Communications Construction Group's (SZSE:002941) Soft Earnings

Shareholders appeared unconcerned with Xinjiang Communications Construction Group Co., Ltd.'s (SZSE:002941) lackluster earnings report last week. Our analysis suggests that while the profits are soft, the foundations of the business are strong.

See our latest analysis for Xinjiang Communications Construction Group

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Xinjiang Communications Construction Group's profit was reduced by CN¥93m, due to unusual items, over the last year. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect Xinjiang Communications Construction Group to produce a higher profit next year, all else being equal.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Xinjiang Communications Construction Group.

Our Take On Xinjiang Communications Construction Group's Profit Performance

Unusual items (expenses) detracted from Xinjiang Communications Construction Group's earnings over the last year, but we might see an improvement next year. Because of this, we think Xinjiang Communications Construction Group's earnings potential is at least as good as it seems, and maybe even better! And on top of that, its earnings per share have grown at an extremely impressive rate 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. If you'd like to know more about Xinjiang Communications Construction 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 Xinjiang Communications Construction Group.

This note has only looked at a single factor that sheds light on the nature of Xinjiang Communications Construction 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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.

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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.