Fujian Qingshan Paper Industry's (SHSE:600103) Sluggish Earnings Might Be Just The Beginning Of Its Problems

A lackluster earnings announcement from Fujian Qingshan Paper Industry Co., Ltd. (SHSE:600103) last week didn't sink the stock price. We think that investors are worried about some weaknesses underlying the earnings.

See our latest analysis for Fujian Qingshan Paper Industry

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Fujian Qingshan Paper Industry's profit received a boost of CN¥27m in unusual items, over the last year. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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 Fujian Qingshan Paper Industry 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 Fujian Qingshan Paper Industry.

Our Take On Fujian Qingshan Paper Industry's Profit Performance

Arguably, Fujian Qingshan Paper Industry's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Fujian Qingshan Paper Industry's statutory profits are better than its underlying earnings power. Nonetheless, it's still worth noting that its earnings per share have grown at 66% 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 if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. To help with this, we've discovered 3 warning signs (1 doesn't sit too well with us!) that you ought to be aware of before buying any shares in Fujian Qingshan Paper Industry.

This note has only looked at a single factor that sheds light on the nature of Fujian Qingshan Paper 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.