Liuzhou Liangmianzhen's (SHSE:600249) Earnings Are Weaker Than They Seem

Liuzhou Liangmianzhen Co., Ltd.'s (SHSE:600249) robust earnings report didn't manage to move the market for its stock. Our analysis suggests that this might be because shareholders have noticed some concerning underlying factors.

See our latest analysis for Liuzhou Liangmianzhen

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Liuzhou Liangmianzhen's profit received a boost of CN¥62m in unusual items, over the last year. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. Liuzhou Liangmianzhen had a rather significant contribution from unusual items relative to its profit to September 2024. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Liuzhou Liangmianzhen.

Our Take On Liuzhou Liangmianzhen's Profit Performance

As we discussed above, we think the significant positive unusual item makes Liuzhou Liangmianzhen's earnings a poor guide to its underlying profitability. For this reason, we think that Liuzhou Liangmianzhen's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. But at least holders can take some solace from the 55% EPS growth in the last year. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. If you want to do dive deeper into Liuzhou Liangmianzhen, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 2 warning signs for Liuzhou Liangmianzhen and you'll want to know about these.

Today we've zoomed in on a single data point to better understand the nature of Liuzhou Liangmianzhen'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.