HF Foods Group's (NASDAQ:HFFG) Solid Earnings May Rest On Weak Foundations

HF Foods Group Inc. (NASDAQ:HFFG) just released a solid earnings report, and the stock displayed some strength. Despite this, our analysis suggests that there are some factors weakening the foundations of those good profit numbers.

See our latest analysis for HF Foods Group

How Do Unusual Items Influence Profit?

Importantly, our data indicates that HF Foods Group's profit received a boost of US$2.2m in unusual items, over the last year. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of HF Foods Group.

Our Take On HF Foods Group's Profit Performance

Arguably, HF Foods Group's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that HF Foods Group's true underlying earnings power is actually less than its statutory profit. In further bad news, its earnings per share decreased in the last year. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. If you'd like to know more about HF Foods Group as a business, it's important to be aware of any risks it's facing. For instance, we've identified 4 warning signs for HF Foods Group (1 doesn't sit too well with us) you should be familiar with.

This note has only looked at a single factor that sheds light on the nature of HF Foods Group'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.