Jiangxi Wannianqing Cement's (SZSE:000789) Conservative Accounting Might Explain Soft Earnings

The market for Jiangxi Wannianqing Cement Co., Ltd.'s (SZSE:000789) shares didn't move much after it posted weak earnings recently. Our analysis suggests that while the profits are soft, the foundations of the business are strong.

See our latest analysis for Jiangxi Wannianqing Cement

The Impact Of Unusual Items On Profit

To properly understand Jiangxi Wannianqing Cement's profit results, we need to consider the CN¥41m expense attributed to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Jiangxi Wannianqing Cement to produce a higher profit next year, all else being equal.

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 Jiangxi Wannianqing Cement's Profit Performance

Because unusual items detracted from Jiangxi Wannianqing Cement's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Jiangxi Wannianqing Cement's earnings potential is at least as good as it seems, and maybe even better! On the other hand, its EPS actually shrunk in the last twelve months. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. If you'd like to know more about Jiangxi Wannianqing Cement as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 2 warning signs for Jiangxi Wannianqing Cement you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Jiangxi Wannianqing Cement's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.