We Like The Quality Of Xiwang FoodstuffsLtd's (SZSE:000639) Earnings

Shareholders appeared to be happy with Xiwang Foodstuffs Co.,Ltd.'s (SZSE:000639) solid earnings report last week. This reaction by the market reaction is understandable when looking at headline profits and we have found some further encouraging factors.

Check out our latest analysis for Xiwang FoodstuffsLtd

How Do Unusual Items Influence Profit?

For anyone who wants to understand Xiwang FoodstuffsLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥62m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. If Xiwang FoodstuffsLtd doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Xiwang FoodstuffsLtd.

Our Take On Xiwang FoodstuffsLtd's Profit Performance

Because unusual items detracted from Xiwang FoodstuffsLtd's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Xiwang FoodstuffsLtd's statutory profit actually understates its earnings potential! And it's also positive that the company showed enough improvement to book a profit this year, after losing money 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'd like to know more about Xiwang FoodstuffsLtd 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 Xiwang FoodstuffsLtd.

This note has only looked at a single factor that sheds light on the nature of Xiwang FoodstuffsLtd'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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.