Apple Flavor & Fragrance GroupLtd's (SHSE:603020) Weak Earnings May Only Reveal A Part Of The Whole Picture

Apple Flavor & Fragrance Group Co.,Ltd.'s (SHSE:603020) 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.

See our latest analysis for Apple Flavor & Fragrance GroupLtd

The Impact Of Unusual Items On Profit

For anyone who wants to understand Apple Flavor & Fragrance GroupLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥26m worth of unusual items. 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. Which is hardly surprising, given the name. We can see that Apple Flavor & Fragrance GroupLtd's positive unusual items were quite significant relative to its profit in the year to March 2024. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Apple Flavor & Fragrance GroupLtd.

Our Take On Apple Flavor & Fragrance GroupLtd's Profit Performance

As we discussed above, we think the significant positive unusual item makes Apple Flavor & Fragrance GroupLtd's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Apple Flavor & Fragrance GroupLtd's underlying earnings power is lower than its statutory profit. In further bad news, its earnings per share decreased in the last year. 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. Be aware that Apple Flavor & Fragrance GroupLtd is showing 3 warning signs in our investment analysis and 1 of those shouldn't be ignored...

This note has only looked at a single factor that sheds light on the nature of Apple Flavor & Fragrance GroupLtd'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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.

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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.