Weak Statutory Earnings May Not Tell The Whole Story For Xinxing Ductile Iron Pipes (SZSE:000778)

Xinxing Ductile Iron Pipes Co., Ltd.'s (SZSE:000778) recent weak earnings report didn't cause a big stock movement. However, we believe that investors should be aware of some underlying factors which may be of concern.

See our latest analysis for Xinxing Ductile Iron Pipes

The Impact Of Unusual Items On Profit

For anyone who wants to understand Xinxing Ductile Iron Pipes' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥610m worth of unusual items. 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'. We can see that Xinxing Ductile Iron Pipes' positive unusual items were quite significant relative to its profit in the year to September 2024. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

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 Xinxing Ductile Iron Pipes' Profit Performance

As previously mentioned, Xinxing Ductile Iron Pipes' large boost from unusual items won't be there indefinitely, so its statutory earnings are probably a poor guide to its underlying profitability. As a result, we think it may well be the case that Xinxing Ductile Iron Pipes' underlying earnings power is lower than its statutory profit. Sadly, its EPS was down over the last twelve months. 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 want to do dive deeper into Xinxing Ductile Iron Pipes, you'd also look into what risks it is currently facing. At Simply Wall St, we found 2 warning signs for Xinxing Ductile Iron Pipes and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of Xinxing Ductile Iron Pipes' 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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.