Soft earnings didn't appear to concern Chen Ke Ming Food Manufacturing Co., Ltd.'s (SZSE:002661) shareholders over the last week. Our analysis suggests that while the profits are soft, the foundations of the business are strong.

The Impact Of Unusual Items On Profit

For anyone who wants to understand Chen Ke Ming Food Manufacturing's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥50m due 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. Chen Ke Ming Food Manufacturing took a rather significant hit from unusual items in the year to June 2024. 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 Chen Ke Ming Food Manufacturing.

Our Take On Chen Ke Ming Food Manufacturing's Profit Performance

As we discussed above, we think the significant unusual expense will make Chen Ke Ming Food Manufacturing's statutory profit lower than it would otherwise have been. Because of this, we think Chen Ke Ming Food Manufacturing's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! Unfortunately, though, its earnings per share actually fell back over 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Every company has risks, and we've spotted 5 warning signs for Chen Ke Ming Food Manufacturing (of which 1 is potentially serious!) you should know about.

This note has only looked at a single factor that sheds light on the nature of Chen Ke Ming Food Manufacturing'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.