A lackluster earnings announcement from China Resources Gas Group Limited (HKG:1193) last week didn't sink the stock price. However, we believe that investors should be aware of some underlying factors which may be of concern.
View our latest analysis for China Resources Gas Group
How Do Unusual Items Influence Profit?
For anyone who wants to understand China Resources Gas Group's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from HK$1.2b 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. Which is hardly surprising, given the name. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).
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 Resources Gas Group's Profit Performance
Arguably, China Resources Gas Group's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that China Resources Gas Group's statutory profits are better than its underlying earnings power. Sadly, its EPS was down over the last twelve months. 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. If you want to do dive deeper into China Resources Gas Group, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 1 warning sign for China Resources Gas Group and you'll want to know about this.
This note has only looked at a single factor that sheds light on the nature of China Resources Gas Group's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.