Zhe Jiang Li Zi Yuan FoodLtd's (SHSE:605337) Sluggish Earnings Might Be Just The Beginning Of Its Problems

The subdued market reaction suggests that Zhe Jiang Li Zi Yuan Food Co.,Ltd.'s (SHSE:605337) recent earnings didn't contain any surprises. However, we believe that investors should be aware of some underlying factors which may be of concern.

Check out our latest analysis for Zhe Jiang Li Zi Yuan FoodLtd

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Zhe Jiang Li Zi Yuan FoodLtd's profit received a boost of CN¥43m in unusual items, over the last year. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. 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 Zhe Jiang Li Zi Yuan FoodLtd's Profit Performance

We'd posit that Zhe Jiang Li Zi Yuan FoodLtd's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that Zhe Jiang Li Zi Yuan FoodLtd's true underlying earnings power is actually less than its statutory profit. In further bad news, its earnings per share decreased in 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. If you'd like to know more about Zhe Jiang Li Zi Yuan FoodLtd as a business, it's important to be aware of any risks it's facing. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Zhe Jiang Li Zi Yuan FoodLtd.

Today we've zoomed in on a single data point to better understand the nature of Zhe Jiang Li Zi Yuan FoodLtd'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 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.