CNNC Hua Yuan Titanium Dioxide's (SZSE:002145) Profits Appear To Have Quality Issues

The recent earnings posted by CNNC Hua Yuan Titanium Dioxide Co., Ltd (SZSE:002145) were solid, but the stock didn't move as much as we expected. We think this is due to investors looking beyond the statutory profits and being concerned with what they see.

View our latest analysis for CNNC Hua Yuan Titanium Dioxide

How Do Unusual Items Influence Profit?

To properly understand CNNC Hua Yuan Titanium Dioxide's profit results, we need to consider the CN¥71m gain attributed to 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. 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. If CNNC Hua Yuan Titanium Dioxide doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of CNNC Hua Yuan Titanium Dioxide.

Our Take On CNNC Hua Yuan Titanium Dioxide's Profit Performance

Arguably, CNNC Hua Yuan Titanium Dioxide's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that CNNC Hua Yuan Titanium Dioxide's statutory profits are better than its underlying earnings power. The good news is that, its earnings per share increased by 34% 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Every company has risks, and we've spotted 1 warning sign for CNNC Hua Yuan Titanium Dioxide you should know about.

Today we've zoomed in on a single data point to better understand the nature of CNNC Hua Yuan Titanium Dioxide'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. 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.