There May Be Underlying Issues With The Quality Of Xinjiang Xinxin Mining Industry's (HKG:3833) Earnings

Xinjiang Xinxin Mining Industry Co., Ltd.'s (HKG:3833) robust earnings report didn't manage to move the market for its stock. We did some digging, and we found some concerning factors in the details.

We've discovered 1 warning sign about Xinjiang Xinxin Mining Industry. View them for free.

How Do Unusual Items Influence Profit?

For anyone who wants to understand Xinjiang Xinxin Mining Industry's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥17m worth of unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. If Xinjiang Xinxin Mining Industry 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 Xinjiang Xinxin Mining Industry.

Our Take On Xinjiang Xinxin Mining Industry's Profit Performance

Arguably, Xinjiang Xinxin Mining Industry's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Xinjiang Xinxin Mining Industry's true underlying earnings power is actually less than its statutory profit. The good news is that, its earnings per share increased by 14% in the last year. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. So while earnings quality is important, it's equally important to consider the risks facing Xinjiang Xinxin Mining Industry at this point in time. You'd be interested to know, that we found 1 warning sign for Xinjiang Xinxin Mining Industry and you'll want to know about it.

Today we've zoomed in on a single data point to better understand the nature of Xinjiang Xinxin Mining Industry'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.