We Think Shanghai Huili Building Materials' (SHSE:900939) Healthy Earnings Might Be Conservative

Shanghai Huili Building Materials Co., Ltd.'s (SHSE:900939) recent earnings report didn't offer any surprises, with the shares unchanged over the last week. We did some analysis to find out why and believe that investors might be missing some encouraging factors contained in the earnings.

See our latest analysis for Shanghai Huili Building Materials

How Do Unusual Items Influence Profit?

For anyone who wants to understand Shanghai Huili Building Materials' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥1.3m 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. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. If Shanghai Huili Building Materials 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 Shanghai Huili Building Materials.

Our Take On Shanghai Huili Building Materials' Profit Performance

Unusual items (expenses) detracted from Shanghai Huili Building Materials' earnings over the last year, but we might see an improvement next year. Because of this, we think Shanghai Huili Building Materials' earnings potential is at least as good as it seems, and maybe even better! 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. If you want to do dive deeper into Shanghai Huili Building Materials, you'd also look into what risks it is currently facing. In terms of investment risks, we've identified 2 warning signs with Shanghai Huili Building Materials, and understanding these should be part of your investment process.

This note has only looked at a single factor that sheds light on the nature of Shanghai Huili Building Materials' profit. But there are plenty of other ways to inform your opinion of a company. 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.