Earnings Troubles May Signal Larger Issues for Jiangsu Lihua Animal Husbandry (SZSE:300761) Shareholders

Despite Jiangsu Lihua Animal Husbandry Co., Ltd.'s (SZSE:300761) recent earnings report having lackluster headline numbers, the market responded positively. Sometimes, shareholders are willing to ignore soft numbers with the hope that they will improve, but our analysis suggests this is unlikely for Jiangsu Lihua Animal Husbandry.

See our latest analysis for Jiangsu Lihua Animal Husbandry

The Impact Of Unusual Items On Profit

For anyone who wants to understand Jiangsu Lihua Animal Husbandry's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥32m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. Which is hardly surprising, given the name. Jiangsu Lihua Animal Husbandry had a rather significant contribution from unusual items relative to its profit to March 2024. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

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 Jiangsu Lihua Animal Husbandry's Profit Performance

As we discussed above, we think the significant positive unusual item makes Jiangsu Lihua Animal Husbandry's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Jiangsu Lihua Animal Husbandry's underlying earnings power is lower than its statutory profit. Sadly, its EPS was down over the last twelve months. 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. So while earnings quality is important, it's equally important to consider the risks facing Jiangsu Lihua Animal Husbandry at this point in time. Every company has risks, and we've spotted 2 warning signs for Jiangsu Lihua Animal Husbandry you should know about.

Today we've zoomed in on a single data point to better understand the nature of Jiangsu Lihua Animal Husbandry's profit. But there are plenty of other ways to inform your opinion of a company. 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 that insiders are buying 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.