Shareholders appeared unconcerned with YuanShengTai Dairy Farm Limited's (HKG:1431) lackluster earnings report last week. We did some digging, and we believe the earnings are stronger than they seem.
View our latest analysis for YuanShengTai Dairy Farm
SEHK:1431 Earnings and Revenue History September 29th 2022How Do Unusual Items Influence Profit?
To properly understand YuanShengTai Dairy Farm's profit results, we need to consider the CN¥342m expense attributed to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. 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. YuanShengTai Dairy Farm took a rather significant hit from unusual items in the year to June 2022. As a result, we can surmise that the unusual items made its statutory profit significantly weaker than it would otherwise be.
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of YuanShengTai Dairy Farm.
Our Take On YuanShengTai Dairy Farm's Profit Performance
As we discussed above, we think the significant unusual expense will make YuanShengTai Dairy Farm's statutory profit lower than it would otherwise have been. Based on this observation, we consider it possible that YuanShengTai Dairy Farm'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. If you want to do dive deeper into YuanShengTai Dairy Farm, you'd also look into what risks it is currently facing. While conducting our analysis, we found that YuanShengTai Dairy Farm has 2 warning signs and it would be unwise to ignore these.
Today we've zoomed in on a single data point to better understand the nature of YuanShengTai Dairy Farm'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. 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.