Chacha Food Company's (SZSE:002557) Shareholders May Want To Dig Deeper Than Statutory Profit

Chacha Food Company, Limited (SZSE:002557) just released a solid earnings report, and the stock displayed some strength. Despite this, our analysis suggests that there are some factors weakening the foundations of those good profit numbers.

Check out our latest analysis for Chacha Food Company

How Do Unusual Items Influence Profit?

To properly understand Chacha Food Company's profit results, we need to consider the CN¥102m 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 crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. 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 Chacha Food Company's Profit Performance

Arguably, Chacha Food Company's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Chacha Food Company's statutory profits are better than its underlying earnings power. Nonetheless, it's still worth noting that its earnings per share have grown at 5.1% over the last three years. 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. Ultimately, this article has formed an opinion based on historical data. However, it can also be great to think about what analysts are forecasting for the future. So feel free to check out our free graph representing analyst forecasts.

This note has only looked at a single factor that sheds light on the nature of Chacha Food Company'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 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.