We Think You Should Be Aware Of Some Concerning Factors In Shanghai Ziyan Foods' (SHSE:603057) Earnings

Shanghai Ziyan Foods Co., Ltd.'s (SHSE:603057 ) stock didn't jump after it announced some healthy earnings. Our analysis showed that there are some concerning factors in the earnings that investors may be cautious of.

See our latest analysis for Shanghai Ziyan Foods

How Do Unusual Items Influence Profit?

To properly understand Shanghai Ziyan Foods' profit results, we need to consider the CN¥80m gain attributed to unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And that's as you'd expect, given these boosts are described as 'unusual'. If Shanghai Ziyan Foods doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

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 Shanghai Ziyan Foods' Profit Performance

Arguably, Shanghai Ziyan Foods' statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Shanghai Ziyan Foods' statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 36% EPS growth in the last year. 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 Shanghai Ziyan Foods, you'd also look into what risks it is currently facing. Be aware that Shanghai Ziyan Foods is showing 2 warning signs in our investment analysis and 1 of those is a bit unpleasant...

This note has only looked at a single factor that sheds light on the nature of Shanghai Ziyan Foods' 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 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.