There May Be Reason For Hope In Shaanxi Coal Industry's (SHSE:601225) Disappointing Earnings

Soft earnings didn't appear to concern Shaanxi Coal Industry Company Limited's (SHSE:601225) shareholders over the last week. We did some digging, and we believe the earnings are stronger than they seem.

See our latest analysis for Shaanxi Coal Industry

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Shaanxi Coal Industry's profit was reduced by CN¥5.2b, 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, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Shaanxi Coal Industry to produce a higher profit next year, all else being equal.

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 Shaanxi Coal Industry's Profit Performance

Because unusual items detracted from Shaanxi Coal Industry's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Shaanxi Coal Industry's earnings potential is at least as good as it seems, and maybe even better! And the EPS is up 19% annually, 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. So while earnings quality is important, it's equally important to consider the risks facing Shaanxi Coal Industry at this point in time. At Simply Wall St, we found 2 warning signs for Shaanxi Coal Industry and we think they deserve your attention.

This note has only looked at a single factor that sheds light on the nature of Shaanxi Coal Industry's profit. But there are plenty of other ways to inform your opinion of a company. 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 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.