Jiahe Foods Industry's (SHSE:605300) Anemic Earnings Might Be Worse Than You Think

The subdued market reaction suggests that Jiahe Foods Industry Co., Ltd.'s (SHSE:605300) recent earnings didn't contain any surprises. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

View our latest analysis for Jiahe Foods Industry

How Do Unusual Items Influence Profit?

For anyone who wants to understand Jiahe Foods Industry's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥36m worth of 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'. If Jiahe Foods Industry 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 Jiahe Foods Industry's Profit Performance

Arguably, Jiahe Foods Industry's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Jiahe Foods Industry's true underlying earnings power is actually less than its statutory profit. Sadly, its EPS was down over the last twelve months. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example - Jiahe Foods Industry has 1 warning sign we think you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Jiahe Foods Industry's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.

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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.