Health and Plant Protein Group's (ASX:HPP) Shareholders May Want To Dig Deeper Than Statutory Profit

Health and Plant Protein Group Limited's (ASX:HPP) robust recent earnings didn't do much to move the stock. However the statutory profit number doesn't tell the whole story, and we have found some factors which might be of concern to shareholders.

Check out our latest analysis for Health and Plant Protein Group

How Do Unusual Items Influence Profit?

To properly understand Health and Plant Protein Group's profit results, we need to consider the AU$8.1m gain attributed to unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's as you'd expect, given these boosts are described as 'unusual'. Health and Plant Protein Group had a rather significant contribution from unusual items relative to its profit to December 2022. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Health and Plant Protein Group.

Our Take On Health and Plant Protein Group's Profit Performance

As we discussed above, we think the significant positive unusual item makes Health and Plant Protein Group's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Health and Plant Protein Group's underlying earnings power is lower than its statutory profit. On the bright side, the company showed enough improvement to book a profit this year, after losing money 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. To that end, you should learn about the 4 warning signs we've spotted with Health and Plant Protein Group (including 3 which are potentially serious).

This note has only looked at a single factor that sheds light on the nature of Health and Plant Protein Group'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. 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.