Guangxi Fenglin Wood Industry Group Co.,Ltd (SHSE:601996) just reported healthy earnings but the stock price didn't move much. Investors are probably missing some underlying factors which are encouraging for the future of the company.

The Impact Of Unusual Items On Profit

For anyone who wants to understand Guangxi Fenglin Wood Industry GroupLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥11m 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, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Guangxi Fenglin Wood Industry GroupLtd to produce a higher profit next year, all else being equal.

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 Guangxi Fenglin Wood Industry GroupLtd's Profit Performance

Unusual items (expenses) detracted from Guangxi Fenglin Wood Industry GroupLtd's earnings over the last year, but we might see an improvement next year. Because of this, we think Guangxi Fenglin Wood Industry GroupLtd'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. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Guangxi Fenglin Wood Industry GroupLtd.

This note has only looked at a single factor that sheds light on the nature of Guangxi Fenglin Wood Industry GroupLtd'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 that insiders are buying.

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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.