Earnings Troubles May Signal Larger Issues for Zhongnongfa Seed Industry Group (SHSE:600313) Shareholders

Zhongnongfa Seed Industry Group Co., Ltd.'s (SHSE:600313) recent weak earnings report didn't cause a big stock movement. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

View our latest analysis for Zhongnongfa Seed Industry Group

How Do Unusual Items Influence Profit?

For anyone who wants to understand Zhongnongfa Seed Industry Group's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥129m worth of unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's as you'd expect, given these boosts are described as 'unusual'. We can see that Zhongnongfa Seed Industry Group's positive unusual items were quite significant relative to its profit in the year 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 Zhongnongfa Seed Industry Group.

Our Take On Zhongnongfa Seed Industry Group's Profit Performance

As we discussed above, we think the significant positive unusual item makes Zhongnongfa Seed Industry Group's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Zhongnongfa Seed Industry Group's underlying earnings power is lower than its statutory profit. But on the bright side, its earnings per share have grown at an extremely impressive rate over the last three years. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example, we've discovered 2 warning signs that you should run your eye over to get a better picture of Zhongnongfa Seed Industry Group.

Today we've zoomed in on a single data point to better understand the nature of Zhongnongfa Seed Industry Group's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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 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.