Guilin Layn Natural Ingredients' (SZSE:002166) Shareholders Have More To Worry About Than Only Soft Earnings

Investors were disappointed by Guilin Layn Natural Ingredients Corp.'s (SZSE:002166 ) latest earnings release. We did some analysis, and found that there are some reasons to be cautious about the headline numbers.

Check out our latest analysis for Guilin Layn Natural Ingredients

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Guilin Layn Natural Ingredients' profit received a boost of CN¥55m 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. 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'. Guilin Layn Natural Ingredients had a rather significant contribution from unusual items relative to its profit to December 2023. 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 Guilin Layn Natural Ingredients' Profit Performance

As previously mentioned, Guilin Layn Natural Ingredients' large boost from unusual items won't be there indefinitely, so its statutory earnings are probably a poor guide to its underlying profitability. As a result, we think it may well be the case that Guilin Layn Natural Ingredients' underlying earnings power is lower than its statutory profit. Sadly, its EPS was down over the last twelve months. 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 Guilin Layn Natural Ingredients as a business, it's important to be aware of any risks it's facing. Our analysis shows 3 warning signs for Guilin Layn Natural Ingredients (1 shouldn't be ignored!) and we strongly recommend you look at these before investing.

This note has only looked at a single factor that sheds light on the nature of Guilin Layn Natural Ingredients' 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.