Some May Be Optimistic About Chongqing Yukaifa's (SZSE:000514) Earnings

The market was pleased with the recent earnings report from Chongqing Yukaifa Co., Ltd (SZSE:000514), despite the profit numbers being soft. We think that investors might be looking at some positive factors beyond the earnings numbers.

See our latest analysis for Chongqing Yukaifa

How Do Unusual Items Influence Profit?

To properly understand Chongqing Yukaifa's profit results, we need to consider the CN¥213m expense attributed to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. Chongqing Yukaifa took a rather significant hit from unusual items in the year to March 2024. All else being equal, this would likely have the effect of making the statutory profit look worse than its underlying earnings power.

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

Our Take On Chongqing Yukaifa's Profit Performance

As we discussed above, we think the significant unusual expense will make Chongqing Yukaifa's statutory profit lower than it would otherwise have been. Based on this observation, we consider it possible that Chongqing Yukaifa's statutory profit actually understates its earnings potential! Unfortunately, though, its earnings per share actually fell back over 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. For example, we've discovered 2 warning signs that you should run your eye over to get a better picture of Chongqing Yukaifa.

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