Weak Statutory Earnings May Not Tell The Whole Story For Hangzhou Tianyuan Pet Products (SZSE:301335)

The subdued market reaction suggests that Hangzhou Tianyuan Pet Products CO., LTD's (SZSE:301335) recent earnings didn't contain any surprises. We think that investors are worried about some weaknesses underlying the earnings.

Check out our latest analysis for Hangzhou Tianyuan Pet Products

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Hangzhou Tianyuan Pet Products' profit received a boost of CN¥9.8m 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. If Hangzhou Tianyuan Pet Products 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 Hangzhou Tianyuan Pet Products' Profit Performance

Arguably, Hangzhou Tianyuan Pet Products' statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Hangzhou Tianyuan Pet Products' true underlying earnings power is actually less than its statutory profit. In further bad news, its earnings per share decreased 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Case in point: We've spotted 2 warning signs for Hangzhou Tianyuan Pet Products you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Hangzhou Tianyuan Pet Products' profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.