Chongqing Taiji Industry(Group)Ltd's (SHSE:600129) Sluggish Earnings Might Be Just The Beginning Of Its Problems

The subdued market reaction suggests that Chongqing Taiji Industry(Group) Co.,Ltd's (SHSE:600129) recent earnings didn't contain any surprises. We think that investors are worried about some weaknesses underlying the earnings.

See our latest analysis for Chongqing Taiji Industry(Group)Ltd

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Chongqing Taiji Industry(Group)Ltd's profit received a boost of CN¥72m in unusual items, over the last year. 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 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, after all, that's exactly what the accounting terminology implies. 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).

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 Chongqing Taiji Industry(Group)Ltd's Profit Performance

Arguably, Chongqing Taiji Industry(Group)Ltd's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Chongqing Taiji Industry(Group)Ltd's true underlying earnings power is actually less than its statutory profit. In further bad news, its earnings per share decreased in the last year. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. To that end, you should learn about the 2 warning signs we've spotted with Chongqing Taiji Industry(Group)Ltd (including 1 which is potentially serious).

This note has only looked at a single factor that sheds light on the nature of Chongqing Taiji Industry(Group)Ltd's profit. But there are plenty of other ways to inform your opinion of a company. 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.