CITIC Guoan Information Industry's (SZSE:000839) Solid Earnings Are Supported By Other Strong Factors

Even though CITIC Guoan Information Industry Co., Ltd.'s (SZSE:000839) recent earnings release was robust, the market didn't seem to notice. We think that investors have missed some encouraging factors underlying the profit figures.

See our latest analysis for CITIC Guoan Information Industry

How Do Unusual Items Influence Profit?

For anyone who wants to understand CITIC Guoan Information Industry's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥44m due to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. If CITIC Guoan Information Industry doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of CITIC Guoan Information Industry.

Our Take On CITIC Guoan Information Industry's Profit Performance

Because unusual items detracted from CITIC Guoan Information Industry's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that CITIC Guoan Information Industry's statutory profit actually understates its earnings potential! And it's also positive that the company showed enough improvement to book a profit this year, after losing money 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. For instance, we've identified 2 warning signs for CITIC Guoan Information Industry (1 is a bit unpleasant) you should be familiar with.

This note has only looked at a single factor that sheds light on the nature of CITIC Guoan Information Industry'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.