Impressive Earnings May Not Tell The Whole Story For China Railway Special Cargo Logistics (SZSE:001213)

Despite posting some strong earnings, the market for China Railway Special Cargo Logistics Co., Ltd.'s (SZSE:001213) stock hasn't moved much. We did some digging, and we found some concerning factors in the details.

Check out our latest analysis for China Railway Special Cargo Logistics

How Do Unusual Items Influence Profit?

For anyone who wants to understand China Railway Special Cargo Logistics' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥70m worth of unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And that's as you'd expect, given these boosts are described as 'unusual'. If China Railway Special Cargo Logistics 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 China Railway Special Cargo Logistics.

Our Take On China Railway Special Cargo Logistics' Profit Performance

Arguably, China Railway Special Cargo Logistics' statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that China Railway Special Cargo Logistics' statutory profits are better than its underlying earnings power. But the good news is that its EPS growth over the last three years has been very impressive. 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of China Railway Special Cargo Logistics.

This note has only looked at a single factor that sheds light on the nature of China Railway Special Cargo Logistics' 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 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.