We Think That There Are Some Issues For Chongqing Three Gorges Water Conservancy and Electric Power (SHSE:600116) Beyond Its Promising Earnings

Chongqing Three Gorges Water Conservancy and Electric Power Co., Ltd.'s (SHSE:600116) robust recent earnings didn't do much to move the stock. However the statutory profit number doesn't tell the whole story, and we have found some factors which might be of concern to shareholders.

Check out our latest analysis for Chongqing Three Gorges Water Conservancy and Electric Power

The Impact Of Unusual Items On Profit

To properly understand Chongqing Three Gorges Water Conservancy and Electric Power's profit results, we need to consider the CN¥175m gain attributed to unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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. Which is hardly surprising, given the name. If Chongqing Three Gorges Water Conservancy and Electric Power doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

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 Three Gorges Water Conservancy and Electric Power's Profit Performance

We'd posit that Chongqing Three Gorges Water Conservancy and Electric Power'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 Chongqing Three Gorges Water Conservancy and Electric Power's statutory profits are better than its underlying earnings power. But the happy news is that, while acknowledging we have to look beyond the statutory numbers, those numbers are still improving, with EPS growing at a very high rate over 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. If you want to do dive deeper into Chongqing Three Gorges Water Conservancy and Electric Power, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 3 warning signs for Chongqing Three Gorges Water Conservancy and Electric Power you should know about.

This note has only looked at a single factor that sheds light on the nature of Chongqing Three Gorges Water Conservancy and Electric Power'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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.