Investors Can Find Comfort In COSCO SHIPPING Development's (HKG:2866) Earnings Quality

The most recent earnings report from COSCO SHIPPING Development Co., Ltd. (HKG:2866) was disappointing for shareholders. While the headline numbers were soft, we believe that investors might be missing some encouraging factors.

Check out our latest analysis for COSCO SHIPPING Development

How Do Unusual Items Influence Profit?

Importantly, our data indicates that COSCO SHIPPING Development's profit was reduced by CN¥390m, due to unusual items, over the last year. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. If COSCO SHIPPING Development doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming 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 COSCO SHIPPING Development's Profit Performance

Because unusual items detracted from COSCO SHIPPING Development'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 COSCO SHIPPING Development's statutory profit actually understates its earnings potential! Unfortunately, though, its earnings per share actually fell back 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'd like to know more about COSCO SHIPPING Development as a business, it's important to be aware of any risks it's facing. For example, COSCO SHIPPING Development has 4 warning signs (and 1 which is a bit unpleasant) we think you should know about.

This note has only looked at a single factor that sheds light on the nature of COSCO SHIPPING Development'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.