Juneyao Grand Healthy DrinksCo.Ltd's (SHSE:605388) Anemic Earnings Might Be Worse Than You Think

The market rallied behind Juneyao Grand Healthy DrinksCo.,Ltd.'s (SHSE:605388) stock, leading do a rise in the share price after its recent weak earnings report. While shareholders may be willing to overlook soft profit numbers, we believe that they should also be taking into account some other factors which may be cause for concern.

Check out our latest analysis for Juneyao Grand Healthy DrinksCo.Ltd

How Do Unusual Items Influence Profit?

To properly understand Juneyao Grand Healthy DrinksCo.Ltd's profit results, we need to consider the CN¥27m gain attributed to unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. Which is hardly surprising, given the name. We can see that Juneyao Grand Healthy DrinksCo.Ltd's positive unusual items were quite significant relative to its profit in the year to March 2024. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

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 Juneyao Grand Healthy DrinksCo.Ltd's Profit Performance

As we discussed above, we think the significant positive unusual item makes Juneyao Grand Healthy DrinksCo.Ltd's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Juneyao Grand Healthy DrinksCo.Ltd's underlying earnings power is lower than its statutory profit. In further bad news, its earnings per share decreased in the last year. 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. At Simply Wall St, we found 3 warning signs for Juneyao Grand Healthy DrinksCo.Ltd and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of Juneyao Grand Healthy DrinksCo.Ltd'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.