Does Aluminum Corporation of China's (HKG:2600) Statutory Profit Adequately Reflect Its Underlying Profit?

Broadly speaking, profitable businesses are less risky than unprofitable ones. Having said that, sometimes statutory profit levels are not a good guide to ongoing profitability, because some short term one-off factor has impacted profit levels. Today we'll focus on whether this year's statutory profits are a good guide to understanding Aluminum Corporation of China (HKG:2600).

While Aluminum Corporation of China was able to generate revenue of CN¥177.4b in the last twelve months, we think its profit result of CN¥272.2m was more important. Below, you can see that both its revenue and its profit have fallen over the last three years.

View our latest analysis for Aluminum Corporation of China

Not all profits are equal, and we can learn more about the nature of a company's past profitability by diving deeper into the financial statements. This article will discuss how unusual items have impacted Aluminum Corporation of China's most recent profit results. 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.

How Do Unusual Items Influence Profit?

For anyone who wants to understand Aluminum Corporation of China's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥1.2b 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. 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. Assuming those unusual expenses don't come up again, we'd therefore expect Aluminum Corporation of China to produce a higher profit next year, all else being equal.

Our Take On Aluminum Corporation of China's Profit Performance

Unusual items (expenses) detracted from Aluminum Corporation of China's earnings over the last year, but we might see an improvement next year. Because of this, we think Aluminum Corporation of China's earnings potential is at least as good as it seems, and maybe even better! Furthermore, it has done a great job growing EPS over the last year. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Our analysis shows 3 warning signs for Aluminum Corporation of China (1 is a bit concerning!) and we strongly recommend you look at them before investing.

This note has only looked at a single factor that sheds light on the nature of Aluminum Corporation of China'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 that insiders are buying to be useful.

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This article by Simply Wall St is general in nature. 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.
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