Fujian Minfa Aluminium's (SZSE:002578) Shareholders Have More To Worry About Than Only Soft Earnings

The market rallied behind Fujian Minfa Aluminium Inc.'s (SZSE:002578) stock, leading do a rise in the share price after its recent weak earnings report. Sometimes, shareholders are willing to ignore soft numbers with the hope that they will improve, but our analysis suggests this is unlikely for Fujian Minfa Aluminium.

View our latest analysis for Fujian Minfa Aluminium

How Do Unusual Items Influence Profit?

For anyone who wants to understand Fujian Minfa Aluminium's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥3.1m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. 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).

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Fujian Minfa Aluminium.

Our Take On Fujian Minfa Aluminium's Profit Performance

We'd posit that Fujian Minfa Aluminium's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that Fujian Minfa Aluminium's statutory profits are better than its underlying earnings power. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. You'd be interested to know, that we found 2 warning signs for Fujian Minfa Aluminium and you'll want to know about them.

This note has only looked at a single factor that sheds light on the nature of Fujian Minfa Aluminium'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 with significant insider holdings 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.