We Think You Can Look Beyond Chen Ke Ming Food Manufacturing's (SZSE:002661) Lackluster Earnings

Shareholders appeared unconcerned with Chen Ke Ming Food Manufacturing Co., Ltd.'s (SZSE:002661) lackluster earnings report last week. We did some digging, and we believe the earnings are stronger than they seem.

See our latest analysis for Chen Ke Ming Food Manufacturing

The Impact Of Unusual Items On Profit

To properly understand Chen Ke Ming Food Manufacturing's profit results, we need to consider the CN¥50m expense attributed 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. In the twelve months to June 2024, Chen Ke Ming Food Manufacturing had a big unusual items expense. All else being equal, this would likely have the effect of making the statutory profit look worse than its underlying earnings power.

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

As we mentioned previously, the Chen Ke Ming Food Manufacturing's profit was hampered by unusual items in the last year. Because of this, we think Chen Ke Ming Food Manufacturing's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! On the other hand, its EPS actually shrunk in 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. So while earnings quality is important, it's equally important to consider the risks facing Chen Ke Ming Food Manufacturing at this point in time. Case in point: We've spotted 5 warning signs for Chen Ke Ming Food Manufacturing you should be mindful of and 1 of these makes us a bit uncomfortable.

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 are plenty of other ways to inform your opinion of a company. 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.