Chen Ke Ming Food Manufacturing's (SZSE:002661) Earnings Offer More Than Meets The Eye

Despite posting healthy earnings, Chen Ke Ming Food Manufacturing Co., Ltd.'s (SZSE:002661 ) stock has been quite weak. We have done some analysis, and found some encouraging factors that we believe the shareholders should consider.

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The Impact Of Unusual Items On Profit

Importantly, our data indicates that Chen Ke Ming Food Manufacturing's profit was reduced by CN¥80m, due to unusual items, over the last year. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Chen Ke Ming Food Manufacturing to produce a higher profit next year, all else being equal.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Chen Ke Ming Food Manufacturing.

Our Take On Chen Ke Ming Food Manufacturing's Profit Performance

Unusual items (expenses) detracted from Chen Ke Ming Food Manufacturing's earnings over the last year, but we might see an improvement next year. Because of this, we think Chen Ke Ming Food Manufacturing's earnings potential is at least as good as it seems, and maybe even better! And one can definitely find a positive in the fact that it made a profit this year, despite losing money 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Be aware that Chen Ke Ming Food Manufacturing is showing 4 warning signs in our investment analysis and 2 of those are significant...

Today we've zoomed in on a single data point to better understand the nature of Chen Ke Ming Food Manufacturing'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. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks with significant insider holdings to be useful.

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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.