Nanjing Iron & Steel's (SHSE:600282) Shareholders May Want To Dig Deeper Than Statutory Profit

Nanjing Iron & Steel Co., Ltd.'s (SHSE:600282) healthy profit numbers didn't contain any surprises for investors. However the statutory profit number doesn't tell the whole story, and we have found some factors which might be of concern to shareholders.

View our latest analysis for Nanjing Iron & Steel

How Do Unusual Items Influence Profit?

For anyone who wants to understand Nanjing Iron & Steel's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥415m worth of unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And, after all, that's exactly what the accounting terminology implies. If Nanjing Iron & Steel doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

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 Nanjing Iron & Steel's Profit Performance

Arguably, Nanjing Iron & Steel's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Nanjing Iron & Steel's true underlying earnings power is actually less than its statutory profit. The good news is that, its earnings per share increased by 49% in the last year. 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. For example, we've found that Nanjing Iron & Steel has 2 warning signs (1 is potentially serious!) that deserve your attention before going any further with your analysis.

This note has only looked at a single factor that sheds light on the nature of Nanjing Iron & Steel'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 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.