Shareholders Will Be Pleased With The Quality of China Communications Construction's (HKG:1800) Earnings

When companies post strong earnings, the stock generally performs well, just like China Communications Construction Company Limited's (HKG:1800) stock has recently. Our analysis found some more factors that we think are good for shareholders.

Check out our latest analysis for China Communications Construction

The Impact Of Unusual Items On Profit

For anyone who wants to understand China Communications Construction's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥9.5b 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 that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect China Communications Construction to produce a higher profit next year, all else being equal.

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 China Communications Construction's Profit Performance

Because unusual items detracted from China Communications Construction'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 China Communications Construction's statutory profit actually understates its earnings potential! And the EPS is up 60% annually, over the last three years. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Every company has risks, and we've spotted 3 warning signs for China Communications Construction (of which 1 doesn't sit too well with us!) you should know about.

Today we've zoomed in on a single data point to better understand the nature of China Communications Construction's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.