We Think That There Are More Issues For Gansu Shangfeng CementLtd (SZSE:000672) Than Just Sluggish Earnings

The market wasn't impressed with the soft earnings from Gansu Shangfeng Cement Co.,Ltd (SZSE:000672) recently. Our analysis has found some reasons to be concerned, beyond the weak headline numbers.

View our latest analysis for Gansu Shangfeng CementLtd

How Do Unusual Items Influence Profit?

For anyone who wants to understand Gansu Shangfeng CementLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥107m worth of unusual items. 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 that's as you'd expect, given these boosts are described as 'unusual'. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

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 Gansu Shangfeng CementLtd's Profit Performance

We'd posit that Gansu Shangfeng CementLtd's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that Gansu Shangfeng CementLtd's true underlying earnings power is actually less than its statutory profit. In further bad news, its earnings per share decreased in the last year. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. If you'd like to know more about Gansu Shangfeng CementLtd as a business, it's important to be aware of any risks it's facing. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Gansu Shangfeng CementLtd.

This note has only looked at a single factor that sheds light on the nature of Gansu Shangfeng CementLtd's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.