Zhe Jiang Li Zi Yuan Food Co.,Ltd.'s (SHSE:605337) healthy profit numbers didn't contain any surprises for investors. We believe that shareholders have noticed some concerning factors beyond the statutory profit numbers.
The Impact Of Unusual Items On Profit
To properly understand Zhe Jiang Li Zi Yuan FoodLtd's profit results, we need to consider the CN¥43m gain attributed to unusual items. 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. Which is hardly surprising, given the name. If Zhe Jiang Li Zi Yuan FoodLtd doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.
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 Zhe Jiang Li Zi Yuan FoodLtd's Profit Performance
Arguably, Zhe Jiang Li Zi Yuan FoodLtd's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Zhe Jiang Li Zi Yuan FoodLtd's statutory profits are better than its underlying earnings power. The good news is that, its earnings per share increased by 7.1% in 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. So while earnings quality is important, it's equally important to consider the risks facing Zhe Jiang Li Zi Yuan FoodLtd at this point in time. While conducting our analysis, we found that Zhe Jiang Li Zi Yuan FoodLtd has 1 warning sign and it would be unwise to ignore this.
This note has only looked at a single factor that sheds light on the nature of Zhe Jiang Li Zi Yuan FoodLtd'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. 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.