We Think That There Are Some Issues For Huaxin Cement (SHSE:600801) Beyond Its Promising Earnings

The market for Huaxin Cement Co., Ltd.'s (SHSE:600801) stock was strong after it released a healthy earnings report last week. While the profit numbers were good, our analysis has found some concerning factors that shareholders should be aware of.

See our latest analysis for Huaxin Cement

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Huaxin Cement's profit received a boost of CN¥452m in unusual items, over the last year. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. 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 Huaxin Cement 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 Huaxin Cement's Profit Performance

Arguably, Huaxin Cement's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Huaxin Cement's statutory profits are better than its underlying earnings power. The good news is that its earnings per share increased slightly 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example - Huaxin Cement has 1 warning sign we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Huaxin Cement'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. 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.