Ligao FoodsLtd's (SZSE:300973) Shareholders Have More To Worry About Than Only Soft Earnings

The subdued market reaction suggests that Ligao Foods Co.,Ltd.'s (SZSE:300973) recent earnings didn't contain any surprises. We think that investors are worried about some weaknesses underlying the earnings.

See our latest analysis for Ligao FoodsLtd

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Ligao FoodsLtd's profit received a boost of CN¥14m in unusual items, over the last year. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And that's as you'd expect, given these boosts are described as 'unusual'. If Ligao FoodsLtd doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

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 Ligao FoodsLtd's Profit Performance

Arguably, Ligao FoodsLtd's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Ligao FoodsLtd's true underlying earnings power is actually less than its statutory profit. In further bad news, its earnings per share decreased in the 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. If you'd like to know more about Ligao FoodsLtd as a business, it's important to be aware of any risks it's facing. While conducting our analysis, we found that Ligao FoodsLtd has 2 warning signs and it would be unwise to ignore these.

This note has only looked at a single factor that sheds light on the nature of Ligao FoodsLtd'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. 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.