Investors Can Find Comfort In Fujian Yongan Forestry(Group)Ltd's (SZSE:000663) Earnings Quality

Fujian Yongan Forestry(Group)Joint-Stock Co.,Ltd.'s (SZSE:000663) stock was strong despite it releasing a soft earnings report last week. However, we think the company is showing some signs that things are more promising than they seem.

Check out our latest analysis for Fujian Yongan Forestry(Group)Ltd

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Fujian Yongan Forestry(Group)Ltd's profit was reduced by CN¥89m, due to unusual items, over the last year. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. Fujian Yongan Forestry(Group)Ltd took a rather significant hit from unusual items in the year to September 2024. As a result, we can surmise that the unusual items made its statutory profit significantly weaker 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 Fujian Yongan Forestry(Group)Ltd.

Our Take On Fujian Yongan Forestry(Group)Ltd's Profit Performance

As we discussed above, we think the significant unusual expense will make Fujian Yongan Forestry(Group)Ltd's statutory profit lower than it would otherwise have been. Based on this observation, we consider it possible that Fujian Yongan Forestry(Group)Ltd's statutory profit actually understates its earnings potential! Unfortunately, though, its earnings per share actually fell back over 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. At Simply Wall St, we found 2 warning signs for Fujian Yongan Forestry(Group)Ltd and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of Fujian Yongan Forestry(Group)Ltd's profit. But there are plenty of other ways to inform your opinion of a company. 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.