There May Be Some Bright Spots In China Modern Dairy Holdings' (HKG:1117) Earnings

The market was pleased with the recent earnings report from China Modern Dairy Holdings Ltd. (HKG:1117), despite the profit numbers being soft. We think that investors might be looking at some positive factors beyond the earnings numbers.

Check out our latest analysis for China Modern Dairy Holdings

How Do Unusual Items Influence Profit?

To properly understand China Modern Dairy Holdings' profit results, we need to consider the CN¥1.3b expense attributed to unusual items. 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 that's hardly a surprise given these line items are considered unusual. In the twelve months to December 2023, China Modern Dairy Holdings had a big unusual items expense. All else being equal, this would likely have the effect of making the statutory profit look worse than its underlying earnings power.

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 China Modern Dairy Holdings' Profit Performance

As we mentioned previously, the China Modern Dairy Holdings' profit was hampered by unusual items in the last year. Based on this observation, we consider it possible that China Modern Dairy Holdings' 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. If you'd like to know more about China Modern Dairy Holdings as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 3 warning signs for China Modern Dairy Holdings you should be aware of.

This note has only looked at a single factor that sheds light on the nature of China Modern Dairy Holdings' profit. But there are plenty of other ways to inform your opinion of a company. 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. 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 that insiders are buying 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.