Investors were underwhelmed by the solid earnings posted by Guangdong Jialong Food Co., Ltd. (SZSE:002495) recently. We have done some analysis and have found some comforting factors beneath the profit numbers.

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How Do Unusual Items Influence Profit?

Importantly, our data indicates that Guangdong Jialong Food's profit was reduced by CN¥6.3m, due to unusual items, over the last year. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. 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. Assuming those unusual expenses don't come up again, we'd therefore expect Guangdong Jialong Food to produce a higher profit next year, all else being equal.

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

Our Take On Guangdong Jialong Food's Profit Performance

Because unusual items detracted from Guangdong Jialong Food'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 Guangdong Jialong Food's earnings potential is at least as good as it seems, and maybe even better! And it's also positive that the company showed enough improvement to book a profit this year, after losing money 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 - Guangdong Jialong Food has 1 warning sign we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Guangdong Jialong Food'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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.