China Infrastructure & Logistics Group Ltd.'s (HKG:1719) healthy profit numbers didn't contain any surprises for investors. We believe that shareholders have noticed some concerning factors beyond the statutory profit numbers.
Check out our latest analysis for China Infrastructure & Logistics Group
How Do Unusual Items Influence Profit?
Importantly, our data indicates that China Infrastructure & Logistics Group's profit received a boost of HK$13m in unusual items, over the last year. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. China Infrastructure & Logistics Group had a rather significant contribution from unusual items relative to its profit to June 2024. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of China Infrastructure & Logistics Group.
Our Take On China Infrastructure & Logistics Group's Profit Performance
As previously mentioned, China Infrastructure & Logistics Group's large boost from unusual items won't be there indefinitely, so its statutory earnings are probably a poor guide to its underlying profitability. For this reason, we think that China Infrastructure & Logistics Group's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. On the bright side, the company showed enough improvement to book a profit this year, after losing money 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 China Infrastructure & Logistics Group, you'd also look into what risks it is currently facing. To that end, you should learn about the 2 warning signs we've spotted with China Infrastructure & Logistics Group (including 1 which is a bit concerning).
Today we've zoomed in on a single data point to better understand the nature of China Infrastructure & Logistics Group's profit. But there are plenty of other ways to inform your opinion of a company. 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 with significant insider holdings to be useful.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.