Jiujiuwang Food International's (HKG:1927) Soft Earnings Are Actually Better Than They Appear

Shareholders appeared unconcerned with Jiujiuwang Food International Limited's (HKG:1927) lackluster earnings report last week. Our analysis suggests that while the profits are soft, the foundations of the business are strong.

View our latest analysis for Jiujiuwang Food International

The Impact Of Unusual Items On Profit

To properly understand Jiujiuwang Food International's profit results, we need to consider the CN¥4.0m 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, after all, that's exactly what the accounting terminology implies. If Jiujiuwang Food International doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Jiujiuwang Food International.

Our Take On Jiujiuwang Food International's Profit Performance

Because unusual items detracted from Jiujiuwang Food International's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Jiujiuwang Food International's earnings potential is at least as good as it seems, and maybe even better! On the other hand, its EPS actually shrunk in the last twelve months. 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. If you'd like to know more about Jiujiuwang Food International as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 4 warning signs for Jiujiuwang Food International (of which 2 are significant!) you should know about.

This note has only looked at a single factor that sheds light on the nature of Jiujiuwang Food International's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.