We Think Xinjiang Qingsong Building Materials and Chemicals(Group)CoLtd's (SHSE:600425) Healthy Earnings Might Be Conservative

The market seemed underwhelmed by last week's earnings announcement from Xinjiang Qingsong Building Materials and Chemicals(Group)Co,Ltd. (SHSE:600425) despite the healthy numbers. Our analysis suggests that shareholders might be missing some positive underlying factors in the earnings report.

View our latest analysis for Xinjiang Qingsong Building Materials and Chemicals(Group)CoLtd

The Impact Of Unusual Items On Profit

For anyone who wants to understand Xinjiang Qingsong Building Materials and Chemicals(Group)CoLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥90m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. If Xinjiang Qingsong Building Materials and Chemicals(Group)CoLtd doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming 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 Xinjiang Qingsong Building Materials and Chemicals(Group)CoLtd's Profit Performance

Unusual items (expenses) detracted from Xinjiang Qingsong Building Materials and Chemicals(Group)CoLtd's earnings over the last year, but we might see an improvement next year. Because of this, we think Xinjiang Qingsong Building Materials and Chemicals(Group)CoLtd'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 45% per year 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. In terms of investment risks, we've identified 1 warning sign with Xinjiang Qingsong Building Materials and Chemicals(Group)CoLtd, and understanding this should be part of your investment process.

Today we've zoomed in on a single data point to better understand the nature of Xinjiang Qingsong Building Materials and Chemicals(Group)CoLtd's profit. But there are plenty of other ways to inform your opinion of a company. 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.